The Borrower must contribute cash (or property acceptable to SBA obtained with the cash) or land (that is part of the Project Property) valued at 10 percent or more of the Project cost (exclusive of administrative cost).

A 504 borrower must contribute at least 10 percent of the eligible project costs; in the projects involving a new business or special purpose property, 15 percent; and in the projects involving 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). The adequacy of the borrower's equity position is, as always, a credit matter.

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.
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 and this must be covered in 6BCC's report and analysis.
3. When the Borrower's Contribution is Borrowed
   
   The Borrower may borrow its cash contribution from a third party. If any of the contribution is borrowed, the interest rate must be reasonable. If the loan is secured by any of the Project assets, the loan must be subordinate to the liens securing the 504 loan, and the loan may not be repaid at a faster rate than the 504 Loan unless SBA gives prior written approval.
4. The Requirements for Evidence of the Borrower's Contribution
   
   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. Bank's settlement statement evidencing the purchase of the property; and
   4. The "pay-out sheets" maintained by the interim lender.