SBA 504 Loans For Hemp Related Businesses

ng at below-market, fixed interest rates and long amortization terms up to 25 years for the purchase of major fixed assets, such as commercial real estate and/or fixed heavy duty machinery and equipment.

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Thanks to recent rule changes at the SBA, hemp related businesses are now eligible for capital fixed asset financing under the 504 Loan Program available through Florida First Capital/First Capital Finance.

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Hemp Eligibility

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Consistent with the Agriculture Improvement Act of 2018, a business that grows, produces, processes, distributes or sells products made from hemp is eligible for SBA financing only if the hemp meets the

definition in section 297A of the Agricultural Marketing Act of 1946, and any applicable state definition of hemp, as follows:

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“The term `hemp’ means the plant Cannabis sativa L. and any part of that plant, including the seeds thereof and all derivatives, extracts, cannabinoids, isomers, acids, salts, and salts of isomers, whether growing or not, with a delta-9 tetrahydrocannabinol (THC) concentration of not more than 0.3% on a dry weight basis.”

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Applicants must provide documentation sufficient to demonstrate that the hemp meets the applicable definitions. In addition, for applicants who will be growing, producing, and/or processing hemp, the applicant must provide documentation of the testing protocols the business will follow to ensure that the hemp and any product(s) they extract or produce from it continue to meet the applicable definitions.

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Cannabidiol (CBD) related businesses: The factors to be considered in determining the eligibility of BD-related businesses include, but are not limited to, the following:

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• Where the CBD is derived from (must be hemp with >0.3% delta-9 THC concentration);

• What types of products are being produced and/or sold (e.g., topical products or products to be ingested);

• What health claims, if any, are being made about the product(s); and 

• Whether all products being produced and/or sold comply with all applicable federal laws and regulations, including those issued by the Food and Drug Administration.

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What is the SBA 504 Loan Program?

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Co-lender financing for growing and expanding small businesses designed to facilitate the acquisition of capital fixed assets, such as commercial real estate and/or long-life machinery and equipment.

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Who Can Qualify?

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• Most for-profit, credit worthy, owner-occupied small businesses.

• Maximum tangible net worth of not more than $15 million.

• Average net income after Federal income taxes (excluding carry-over losses) for the two full fiscal years prior to application of not more than $5 million.

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Typical Loan Structure

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• Finance up to 90% of a project as follows:

• 50% commercial lending partner (1st mortgage holder).

• 40% FFCFC/SBA (2nd mortgage holder).

• 10% borrower equity injection.

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Eligible Use of Funds

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• Land and acquisition of existing buildings or new construction.

• Building expansion/renovation.

• Green energy initiative projects.

• Long-life fixed machinery and equipment.

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Ineligible Use of Proceeds

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• Working capital, inventory, goodwill assets, business stock acquisition and franchise fees.

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Loan Amounts (SBA Portions)

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• Up to $5 million of aggregate SBA eligibility on standard 504 projects and up to $5.5 million per 504 energy efficient green project not exceed $16.5 million in the aggregate.

• Up to $5.5 million per eligible small manufacturing project with no limit on total SBA dollars available.

• No maximum limit on commercial lending partner’s loan portion.

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Borrower Contribution

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• 10% in most cases. 15% for start-up businesses (less than two years in operation) or special purpose properties. 20% if the project is both a start up and as well as a special purpose property.

• Equipment only loans may qualify with 10% or 15% contribution.

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