The Small Business Administration offers guaranteed loan programs, one of which is called the SBA 504. This loan provides long-term, fixed-rate financing of up to $5 million for major fixed assets that promote business growth and job creation.
SBA 504 loans are available through Certified Development Companies (CDCs), SBA's community-based partners who regulate nonprofits and promote economic development within their communities. CDCs are certified and regulated by the SBA.
There are two parts to any SBA 504 loan:
- The Bank loan
- The CDC loan
Do I qualify?
Your company must meet the following criteria in order to be qualified for a 504 loan:
- operate a business for profit in the US or its territories
- possess a less than $15 million in tangible net worth
- a two-year period prior to your application with an average net income of less than $5 million after federal income taxes
The SBA size guidelines, possessing competent management competence, a workable business plan, excellent moral character, and the ability to repay the loan are other basic eligibility requirements.
Businesses engaged in passive, speculative, or nonprofit activity are not eligible for loans. Small businesses and lenders are urged to get in touch with a Certified Development Company in their region for more details on eligibility conditions and loan application procedures.
What is a 504 loan used for?
Various items that support business expansion and employment creation can be purchased with a 504 loan. These include investing in or building:
- existing structures or property
- updated facilities
- equipment and machines for the long term
- As well as the development or modernization of:
- lands, roads, services, parking areas, and landscaping
- current facilities
You cannot utilize a 504 loan for:
- Stocks or working capital
- Debt consolidation, repayment, or refinancing
- Real estate speculation or rental property investing
What do I have to submit?
504 loans are only offered by Certified Development Companies (CDCs). Find a CDC in your area first to make sure you are working with a reputable lender.
Then, start putting your 504 loan authorization package together. Use our 504 Authorization File Library to get the paperwork you'll need to apply for your 504 CDC loan.
How can I repaid my 504 loan?
Loan payback terms might vary depending on a number of factors:
Payment conditions – Available maturity terms of 10 and 20 years
Finance charges – Pegged to a percentage point higher than the going market rate for 5-year and 10-year U.S. Treasury securities. Approximately 3% of the debt is covered by this rate, which might be financed by the loan.
Read the articles below to learn more about the Small Business Administration's SBA 504 loan program
- SBA 504 Loans for Ecommerce Business Property AcquisitionCurious about financing your e-commerce property's acquisition with an SBA 504 loan? Discover how you can optimize growth and efficiency.
- SBA 504 Loans for Home Service Business Property AcquisitionGet insights on SBA 504 loans to transform your home service business by owning property with minimal upfront costs. Discover the potential benefits today.
- SBA 504 Loans for Laundromat Real Estate AcquisitionDiscover how SBA 504 loans can revolutionize laundromat acquisitions with low down payments, but is this the right move for you?
- SBA 504 Loans for Building or Renovating a Cabin ResortConsidering a cabin resort project? Discover how SBA 504 loans can offer financial predictability and accessibility, and uncover strategies for long-term success.
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