Program Requirements


Eligibility for SBA 504 Loans
  • Organized as a for-profit business. The business has to be for profit.
  • Legal entity-corporation, partnership, sole proprietor, limited liability company.
  • Any type of legitimate business– manufacturing, wholesale, service, professional service or retail.
  • Small business – either: net worth of $15 million & net profits after taxes under $5.0 million or meet SBA’s other size standards (by sales or number of employees depending on SIC code).
  • Planning to use the loan proceeds for capital investment including land, building, leasehold improvements, renovation, construction, machinery & associated soft costs (The SBA 504 loan program is not a working capital program.)
  • Another lender must be willing to participate in the financing. The SBA 504 loan finances up to 40% of the total project cost in a subordinate lien position and the other lender finances 50%. The business or its owner typically puts in 10%. Economic development goals must be achieved through the project being financed.
  • Owner-user of the project being financed (51% occupancy if existing building; 60% occupancy if new construction) Two or more unrelated small businesses may receive a SBA 504 loan to buy or construct a building as long as they, together, will occupy at least 51% an existing building or 60% of new construction. 
Ineligible Borrowers Include:
  • Nonprofits
  • Speculative development
  • Lending institutions, insurance companies
  • Gambling concerns and private clubs
  • Businesses of a prurient nature
  • Businesses that exclude specific races, sex, or creed 
Eligible Use of Funds:
  • Purchase land, purchase or construct building
  • Modernize, renovate or improve building
  • Purchase machinery and equipment with 10-year useful life
  • Soft costs
  • No maximum total project size
  • Job creation one per $65,000 in SBA 504 funds or meeting other economic development goals
  • Maximum SBA 504 loan size two million dollars under the following Public Policy Goals:
  • Business district
  • Revitalization
  • Exporting
  • Minority enterprise
  • Rural development
  • Modernization
  • Adverse impact of Federal fund reductions
  • Upgrading for health, safety, or environmental reasons 
Ineligible Use of Funds:
  • Working capital
  • Inventory
  • Rolling stock
  • Construction period financing 
Possible Other Requirements:
  • Personal guaranty by 20% or greater owners. 

Loan Term

Maturities of 10, 20 or 25 years are available on the SBA 504 debenture, depending on the useful life of the assets. A minimum of 10 years is required from the private lender on real estate financing and 7 years on machinery and equipment.

Borrower Injection

The small business concern must provide at least 10% of the project cost as equity or subordinated debt. This can be in the form of equity from the business itself or the borrower’s personal resources and other sources may provide a loan for the borrower’s equity contribution.

Loan Collateral

The SBA 504 loan is secured with a lien on real estate and equipment assets.  If credit is unusually risky, additional collateral may be required.

Owner Occupied

The SBA 504 Program is not designed for use by developers or speculators. The small businesses must occupy at least 51% of the building being purchased or renovated immediately upon acquisition and/or completion of renovations. If constructing any new building, the small business concern must occupy at least 60% of the space upon completion of construction and may lease out the remaining 40%.