South Central Tennessee Business Development Corporation
SBA 504 Fixed Asset Loan Program
The South Central Tennessee Business Development Corporation (SCTBDC) is a Certified Development Company (CDC) licensed by the Small Business Administration (SBA) in 1982 to provide financing for a portion of the fixed asset costs of projects in the thirteen county South Central Tennessee service area.
These loans can provide for up to forty percent of the financing for the purchase of fixed assets that have an economic useful life of at least ten years. Funding is through the sale of debentures issued by the CDC, which, upon approval of the Nashville SBA office, are guaranteed 100% by SBA. The total of the debenture amount, any existing SBA direct loan, and the guaranteed portion of any 7(a) bank loans is limited to $1,000,000, but there is no limit on the size of the 504 project.
To be eligible for CDC assistance, an applicant must:
Have a sound business expansion or start-up, which will create at least one job for each $35,000 in debentures;
Be a for profit corporation, partnership, or proprietorship unable to obtain financing for the entire project from conventional sources;
Have a net worth of less than $6 million and an average net profit after tax of less than $2 million for the previous two years;
If building financing is part of the project, must occupy at least 85% of a new building and at least 51% of an existing building;
Have a commitment from a private sector lender (bank, savings and loan, insurance company, etc.) to finance at least 50% of the project.
Typical structure for a $600,000 Project -
| Source of Financing | Amount | Percent | Terms | Collateral |
| Bank, S & L, Ins. Co.etc. | $300,000 | 50% | at least 10 yrs. | 1st Mortgage |
| SCTBDC loan | 240,000 | 40% | 10 or 20 yrs. | 2nd Mortgage |
| Equity - Small Business | 60,000 | 10% | ||
| Total | $600,000 | 100% |
Additional Details:
Repayment terms of the CDC/SBA loans are ten years for machinery and equipment and twenty years for land and buildings.
Collateral - second mortgage on the assets being purchased, personal guarantees of the principals, and, possibly, the pledge of other assets of the business or the principals.
CDC Fees - 1 1/2% of debenture amount at closing and 5/8 % per annum servicing fee.
Interest rate - slightly higher than treasury bonds of the same maturity.
For additional information, contact Doug Williams, South Central Tennessee Business Development Corporation, P.O. Box 1346, Columbia, TN 38402, or call (931) 381-2041.