SBA 504 Loan at East West Bank

The SBA 504 loan program is a long-term, fixed-rate financing solution designed to help small businesses acquire major fixed assets such as commercial real estate, owner-occupied buildings, and heavy equipment. East West Bank partners with Certified Development Companies (CDCs) to offer SBA 504 financing that helps preserve working capital, support expansion, and improve cash flow while promoting job creation and community investment.

Key Benefits

• Low down payment: Typical borrower contribution can be as low as 10% for standard projects, preserving cash for operations and growth.
• Long-term, fixed-rate financing: The CDC portion is generally offered with long amortization periods and fixed interest rates, providing predictable payments over 10, 20, or 25 years.
• Improved liquidity: By financing a large portion of the project through the SBA 504 structure, businesses maintain working capital for daily needs, inventory, and expansion activities.
• Competitive financing for major assets: Designed specifically for purchases of land, buildings, renovations, and manufacturing or processing equipment.
• Leverage community investment: The program encourages job creation and community development by combining bank loans, CDC-backed financing, and borrower equity.

Loan Structure

The SBA 504 loan is a three-party financing arrangement that typically consists of:

• First mortgage: Provided by East West Bank (or another conventional lender) and generally covers up to 50% of the project cost.
• Second mortgage: Made by a Certified Development Company and backed by the SBA, covering up to 40% of eligible costs.
• Borrower contribution: Usually around 10% equity, though this can be higher for startups or special purpose properties.

Eligible Uses of Funds

SBA 504 financing can be used for a wide range of long-term, fixed-asset needs, including:

• Acquisition of land and existing buildings.
• Construction of new facilities or expansion/renovation of existing space.
• Purchase of long-term machinery and equipment.
• Refinancing debt associated with major fixed asset projects, in certain circumstances.

Who Qualifies?

General eligibility criteria include:

• Small business status as defined by SBA size standards (varies by industry).
• Use of proceeds for eligible fixed-asset purchase or improvement.
• Ability to demonstrate reasonable cash flow and repayment capacity.
• Management experience and a viable business plan for growth or stability.

Certain industries and project types may have additional requirements. Businesses typically must create or retain jobs or meet community development goals as part of the SBA 504 program objectives.

Loan Terms and Rate Characteristics

While exact terms and pricing depend on the size and nature of the transaction, local market conditions, and the CDC partnership, typical attributes include:

• Amortization: Long-term amortization for the CDC portion (commonly 10, 20, or 25 years).
• Interest rates: The CDC/SBA portion often features a fixed rate tied to marketable securities auctions and is generally competitive for long-term financing. The bank portion may be fixed or variable depending on the negotiated structure.
• Fees: Fees may include CDC fees, SBA guaranty fees, and customary bank loan fees. These are disclosed during the underwriting process.

Application Process

1. Initial consultation: Discuss project goals, eligibility, and structure with an East West Bank lending officer experienced in SBA 504 financing.
2. Preliminary review: Submit basic business and project information to determine preliminary qualification and estimated financing split.
3. Formal application: Complete loan applications for both the bank and CDC portions, including detailed financial documentation and project plans.
4. Underwriting and approval: East West Bank and the CDC perform underwriting. The CDC submits the SBA portion for final approval.
5. Closing and funding: Upon approvals, loan documents are finalized and the transactions close, enabling project execution.

Required Documentation

Applicants should be prepared to provide:

• Business financial statements (historical and projections).
• Personal financial statements for principals with significant ownership.
• Tax returns (business and personal) for recent years.
• Business plan or project summary detailing use of funds and job impact.
• Purchase agreements, construction budgets, equipment invoices, and appraisals where applicable.

Advantages Compared to Other Financing

Compared with conventional loans, the SBA 504 structure often provides a larger overall financing package with a smaller equity injection, longer repayment terms for the SBA-backed portion, and fixed rates that reduce exposure to interest rate volatility. This makes it particularly attractive for capital-intensive projects where preserving working capital and ensuring predictable, long-term payments are priorities.

Considerations and Limitations

• SBA 504 loans are intended for fixed-asset financing and are not a fit for short-term working capital needs.
• Approval timelines can be longer than for purely conventional loans due to CDC and SBA participation.
• There are program-specific requirements related to job creation and public benefit that must be met for CDC approval.

Is an SBA 504 Loan Right for Your Business?

Businesses planning significant investments in real estate or durable equipment and seeking long-term, stable payment structures often benefit from the SBA 504 framework. East West Bank’s experience in structured lending, combined with CDC partnerships, can help tailor a financing package that aligns with your growth strategy while preserving liquidity and supporting predictable financial planning.

If your project involves purchasing or expanding facilities, modernizing equipment, or refinancing fixed-asset debt under eligible conditions, consider discussing SBA 504 options with an experienced lender to determine whether the program aligns with your capital needs and long-term goals.

Address Bank: Pasadena, California
Bank: East West Bank
Headquarters: Pasadena, California
Products: Loans & Credit
Type: SBA 504 Loan