& Program Parameters
- CIC works with the SBA to provide up to 40% of the total project cost.
- The participating lender, called the “Third Party Lender”, normally finances 50% of the cost on a permanent basis.
- The borrower typically puts down as little as 10% of the total project cost.
- The Third Party Lender also advances the CIC 504 portion of the transaction on an interim basis until the CIC 504 loan is funded.
- Most for-profit small businesses qualify for basic eligibility.
- Only owner-occupied properties are eligible. A small business must occupy at least 51% of the project property if it is an existing building.
- The occupancy requirement goes up to 60% for newly constructed buildings. In addition the Borrower must have the intention and ability to increase to 80% occupancy after 3 years. Excess space can be leased to third parties, but adequate space must come available within 3 years to afford the Borrower an opportunity to expand to 80%. Two or more unrelated small businesses can receive a CIC 504 loan if they combine to meet occupancy requirements.
- Start-up businesses (less than two years old) are eligible, but require an additional 5% equity injection.
- A business can obtain more than one loan from the SBA as long as the total outstanding balances do not exceed the maximum loan amount. One large exception - CIC 504 loans to manufacturers and green projects are viewed as independant transactions. Those businesses may have multiple borrowings that exceed the maximum loan amount.
CIC 504 Project Size
A CIC 504 Project size is virtually unlimited. The 50-40-10 structure is the most common. Applying current loan limits, the maximum non-manufacturing project size under the traditional 50-40-10 structure would be approximately $12.2 million.
That said, a CIC 504 Loan can be a smaller percentage of the financing package. For example, in a $32 million 504 Project the Third Party Lender could provide $24 million in financing together with $4.8 million from CIC 504 financing and $3.2 million from Borrower equity to create a 75-15-10 structure.
Maximum CIC 504 Loan Amounts
- “Standard” CIC 504 Loans are capped at $5 million.
- CIC 504 Loans to manufacturing industries within NAICS sectors 31, 32 and 33, are capped at $5.5 million. "Green" projects also qualify for the larger loan size.
- The CIC 504 Loan amount cannot be greater than 40% of the project cost and cannot exceed the Third Party Lender’s portion of the loan.
Size Standards Qualify MORE BUSINESSES as “Small”
- To qualify as “small”, the borrower must have less then $15 million in net worth and have averaged less than $5 million in net income over the past two years.
- This opens the door for substantial businesses to take full advantage of the larger loan limits.
The quickest and easiest way to determine if a client’s project meets program eligibility requirements is to talk to a loan officer.