SBA 504 and a conventional loan, for owner-user property

Owner-user commercial property is the subject. The business occupies the building. An investor who buys a building to lease to unrelated tenants is describing a different loan, and SBA's 504 page says a 504 loan cannot be used for investment in rental real estate. That investor file is conventional commercial real estate, arranged like any other income-property mortgage. It is not a 504 application with a small owner suite added so the form will go through. A house a person lives in is not either loan.

SBA's 504 page says certified development companies originate a 504 loan in collaboration with a senior lender. The CDC is SBA's nonprofit partner for that program. The senior lender, often a bank, holds the first mortgage. The business supplies equity. SBA states a maximum 504 loan amount of $5.5 million on that page and lists 10-, 20-, and 25-year maturities. It says the 504 loan can purchase, construct, or renovate buildings or land, and can finance long-term equipment. It cannot fund working capital or inventory. Those are SBA's rules. They are not a rate, and they are not a tax opinion. Capital Market Funds is not a certified development company and is not the senior lender.

What a conventional bank loan is, by contrast

A conventional loan on the same owner-user building is one note from one lender. That lender sets the term, the amortization, the recourse, and the prepayment. There is no CDC debenture beside it. The bank may still want the business to occupy the property, but that occupancy test is the bank's credit policy, not SBA's page. If the business can obtain the credit on reasonable terms without a government guarantee, a conventional loan is often the simpler file. SBA's 7(a) page, which is a different program, says 7(a) eligibility includes being unable to get the desired credit on reasonable terms from non-government sources. This essay is 504 versus conventional, not a second copy of the 7(a) comparison. That comparison is 7(a) versus 504 in Arizona.

Neither structure is 'cheaper' on this page. A debenture rate, a bank coupon, and a fee are set when a lender prices a real project. Publishing a comparison of those numbers would be a quote, and this site does not quote rates. It also does not say which interest is deductible. That is tax advice, and this is not tax advice. A CPA answers the tax question. The glossary defines owner-user and SBA 504 in shorter words. The lender-type comparison puts 504 next to other structures without coupons.

How to use the Arizona 504 page and the calculator

The arrangement page for an Arizona project is Arizona SBA 504. It is where this desk says it will introduce a CDC and a senior lender. It is not an application. The SBA 504 calculator does arithmetic on figures you type. It does not know whether your business is eligible, and it does not reserve a debenture.

Capital Market Funds is not a Fannie Mae DUS lender. Agency multifamily debt is a different product from an owner-user 504 project. Craig Hoebing arranges both kinds of commercial requests from Scottsdale under CMB-1047342 and NMLS 1445066. A term sheet from a bank or a CDC, if one is issued, is still not a commitment until that lender says so in a written commitment.