SBA 504 Program

office (605) 367-5353
fax (605) 367-5394

SBA 504 Program

A primary challenge for anyone wanting to open or expand a small business is finding low cost and long-term financing. As an SBA Certified Development Company, Dakota BUSINESS Finance works with local banks to provide loans to small businesses that need to construct, purchase or renovate a building or purchase long-term machinery and equipment. Typically, the banks will provide 50 percent of the financing; Dakota BUSINESS Finance (SBA) will provide 40 percent of the financing; and the small business owner will contribute the remaining 10 percent in the form of an equity or cash injection.

Dakota BUSINESS Finance's portion of the project is a direct loan from the Small Business Administration (SBA), which sells the loans as bonds (or debentures) to investors on a monthly basis. Loan participants must be for-profit businesses and meet standards set by SBA. The benefits to the business owner are:

Loans are long-term
Loans require low down payment thus preserving working capital
Loans are at or below market interest rates
Loan rates are fixed for a 10 to 20 year period

Does my business or project qualify?

Have other financing needs? Consider financing through the South Eastern Development Foundation.

Example $250,000 Project

1. Bank Loan (50%)
2. SBA Loan (40%):
3. Borrower Cash (10%):

$125,000
$100,000
$25,000
$250,000

Example $1,000,000 Project

1. Bank Loan (50%)
2. SBA Loan (40%):
3. Borrower Cash (10%):

$500,000
$400,000
$100,000
$1,000,000

Bank provides 50% of the financing and receives a 1^st lien on the project property.

SBA finances up to 40% of the project and receives a 2^nd subordinate lien on the project property.

Borrower provides a 10%* cash or equity contribution.

For expansion projects, a borrower may be able to pledge existing equity in land/building as the down payment.

* Start-up businesses or "single-purpose"
buildings may require additional equity injection.