The structure of the 504 Loan Program makes it unique among all of the debt financing options available to business borrowers. Three parties are usually involved:

• A Private sector participant (usually your bank) will typically provide 50% of the required financing for an eligible project.
• SomerCor 504, Inc. will typically provide 40% of the required financing on an eligible project- this is the 504 Loan Program share.
• The business itself will contribute a minimum of 10% of the required financing as an equity injection.

From 1:

• Although usually a bank, this private sector participant may also be an insurance company, non-bank lender, or even a seller of the project property. In return for their share (50%) of the required financing, this private sector lender will usually take the first collateral position ( a first on the assets being financed. This lender will charge going market rates for its share of the project and their loan must have at least a ten year term, although rate adjustments can be made at any time.

From 2:

• SomerCor raises the money for its share of the project cost through the monthly sale of bonds on the Capital market. This bond is 100% guaranteed by the full faith and backing of the U.S. Small Business Administration, which makes it an attractive instrument to potential buyers in the public securities market. In return for its share of the project financing (up to 40%), SomerCor takes a second collateral position (second mortgage) on the project assets for 20 years, at an interest rate fixed for the life of the loan and set by the market in the month that the bond is actually sold.

From 3:

• This is usually provided by the business borrower in the form of cash or land. If any of this injection is borrowed and collateralized by the project assets, that loan must be subordinated to SomerCor's financing and the term of that loan must be at least the same as SomerCor's term.
  

It is almost impossible for a smaller sized business to be able to secure 90% financing on a project. It is worth nothing, too, that although this required 10% injection is usually in the form of cash, in the case of an expansion or renovation project it is possible to count existing equity in project land or equity in an existing facility as part, or al, of the required equity contribution to a specific project.

Sometimes an additional equity contribution into a project is necessary. In projects involving a "start-up" business (less than 2 years old), or, in projects with property that has a specialized, single-purpose use (for example, as gas station), the minimum equity contribution must be 15% and the maximum 504 loan program portion is 35%. If the project involves both a startup business AND a specialized, single purpose use property, the minimum equity contribution from the business entity must be 20% and the maximum 504 Loan Program portion is 30%.