Small Business Administration

The Small Business Administration (SBA) is an independent agency of the federal government that helps Americans start, build and grow businesses. The SBA provides financing opportunities to small businesses in Minnesota, including the SBA 504 Loan. In Clay County, this financing can be tapped by working with the Dakota Certified Development Corporation.

SBA 504 Loans

The 504 program provides growing small and medium-sized businesses with long-term, fixed-rate financing for long-term assets such as real estate and equipment.

A complete 504 financing package is a combination of at least three sources: the regional development corporation, borrower equity and a local lender. Through Dakota CDC the SBA may guarantee up to 40 percent of the total project cost, or from $50,000 to $1.5 million (up to $2.0 million in certain cases and $4.0 million for manufacturing). The borrower must inject at least 10 percent of the total funds for any project (up to 20 percent for startup & special purpose). The remaining 50 percent is usually provided by a local financial institution, although other SBA-qualified lenders may also provide the 50 percent. The 504 Program offers terms of 10 years for loans that finance machinery and equipment, and 20 years for real estate loans. Interest rates vary.

To be eligible for a 504 loan, the business and its affiliates must have a net worth lower than $7 million, and an average net income after taxes of lower than $2.5 million per year for two years.