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  A loan structure to keep a company strong

The SBA 504 loan program provides businesses with long-term, below-market fixed-rate, subordinated loans to purchase real estate, build, expand and renovate or make leasehold improvements to buildings or purchase machinery and equipment.  The program requires only a small cash down-payment thereby preserving the business's working capital.  The purpose of the 504 loan program is to create or retain jobs in growing small or mid-sized firms.

Chesapeake provides 504 financing by issuing a SBA-guaranteed debenture for up to 40% of the total cost of the project.  A commercial lender selected by the borrower (or referred by Chesapeake) provides financing for at least 50% of the project.  The borrower provides the remaining 10% in the form of equity or subordinated debt.  For new businesses and some special purpose buildings, the minimum investment form the borrower increases to 15% or 20%.

The maximum amount of 504 financing which Chesapeake can provide is $5,000,000 (up to $5.5 million for qualifying green projects) and the minimum is $200,000.  There are no restrictions on the total project size.

An example of a typical structure is financing provided by Chesapeake to a family amusement center in Westminster, MD with laser tag, mini glo-golf, bumper cars, batting cages and attractions.  The project is the purchase of their property and upgrading their facilities for growth. The uses and sources for the project were:


$ 2,410,000               







Bank - 1st deed of trust

1,625,000       50%

SBA 504 - 2nd deed of trust

1,300,000       40%

Owners - 10%

325,000       10%


$ 3,250,000               

Typical Loan Term

  Private Lender   SBA504 Applicant
Percent of project 50% 40% 10%
Collateral 1st mortgage 2nd mortgage --
Dollar amount no limit $100,000 to $5,000,000  --
Interest rate market below market and fixed  --
Real Estate terms 10+ years 20 years  --
Equipment terms 7 years 10 years --


John Sower
4701 Sangamore Rd St #100N
Bethesda, MD 20816
Tel: 240-224-0217
Tom Turner
Sr. Vice President
4701 Sangamore Rd St #100N
Bethesda, MD 20816

Tel: 410-564-9085

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