When using the 504 program through FDDC, small business owners may be able to get into a commercial fixed asset project with as little as 10% down. Financing is completed with a partner lender at 50% of project costs and FDDC/SBA 504 at 40% of project costs. The owner’s equity can be in the form of cash or land. There are two cases where additional equity will be required:
- If the borrower is new to the business or has less than two years experience in this exact type of business, an additional 5% equity will be required.
- If the project involves special purpose real estate that cannot easily be converted into another business, an additional 5% equity will be required. Examples of special purpose real estate are: gas stations, hotels, recreational facilities, car washes, farms, and nursing homes/assisted living.
If the borrower is both new to the business and the project involves special purpose real estate, the borrower will be required to inject 20% equity.