Q. How much must the borrower contribute?

A 504 borrower must contribute at least 10 percent of the eligible project costs; if the project involves a new business or special purpose property, 15 percent; and if the project involves both a new business and special purpose property, 20 percent. The borrower's injection may be in the form of either equity or borrowed funds (with terms acceptable to SBA).

1. Eligible Land Contribution

The Borrower's contribution may be land (including buildings, structures and other site improvements, which will be part of the Project Property) previously acquired by the Borrower or the CDC.

2. Machinery and Equipment Project

On projects involving new machinery and equipment, the allowance given as "trade in" on the old machinery and equipment may be used as part of the equity injection. You must be satisfied that the allowance is not inflated; this must be covered in the CDC's report and analysis.

The following are some documents that may be used as evidence of the equity contribution:

1. Copies of all loan documents evidencing the source and terms of any loans;
2. Copies of paid receipts, canceled checks or other evidence satisfactory to SBA;
3. A bank's settlement statement evidencing the purchase of the property; and
4. The "pay-out sheets" maintained by the interim lender.