SBA 504 Loan Program

HomeSBA 504 Loan Program

Grow Your Small Business with a SBA 504 Loan

Established by Congress in 1986, the SBA 504 Loan Program provides healthy, expanding businesses with long-term, below-market, fixed-rate financing for the acquisition of land and building, machinery and equipment, and construction and renovation.

Download SBA 504 Loan Application

Eligible Businesses

  • Any for-profit businesses—corporation, partnership or proprietorship—are eligible to apply. The business tangible net worth may not exceed $15 million and the net profit after tax may not exceed $5 million.

Ineligible Businesses

  • Not for profits
  • Speculative Developers
  • Insurance Companies
  • Gambling Concerns
  • Private Clubs that restrict membership

Maximum Amount of SBA Participation

  • Up to 40% of eligible cost, with a $5,000,000 maximum
  • Manufacturers and energy efficiency projects are eligible for up to $5,500,000
  • These projects enable unlimited access to SBA funding and the total project size is unlimited

Eligible Use of Funds

  • Purchase of land
  • Construction of building
  • Purchase of building
  • Modernization, renovation or improvement of building
  • Purchase of machinery or equipment with useful life of 10 years or more

Ineligible Use of Funds

  • Working Capital
  • Inventory
  • Rolling Stock

Financing Method

  • Private lender provides 50% of project cost, and SBA 504 Loan provides 40%
  • Equity requirements are at least 10%

Loan Terms

  • Maximum of 40% of project
  • Terms of 20 years for real estate, 10 years for machinery and equipment
  • Fixed, below-market interest rate
  • Total fees of 2.17%, plus an attorney closing fee
  • Fees can be included in the 504 loan amount and financed over a 20-year term
  • Bank Financing
  • CDC/SBA 504 Loan
  • Existing Equity

Sample Financing Breakdown

This breakdown would be for a project with total costs of $1 million:

Entity Loan Amount Percent of Project Term Interest Collateral
Private Lender $500000 50% 10 years Market 1st Mortgage
CDC/SBA $400000 40% 20 years Below Market/Fixed 2nd Mortgage
Business/Borrower $100000 10% n/a n/a n/a

Special Purpose Projects

SBA defines certain properties as special purpose.

  • Amusement parks
  • Bowling alleys
  • Car wash properties
  • Cemeteries
  • Clubhouses
  • Cold storage facilities where more than 50% of total square footage is equipped for refrigeration
  • Dormitories
  • Farms, including dairy facilities
  • Funeral homes with crematoriums
  • Gas stations
  • Golf courses
  • Hospitals, surgery centers, urgent care centers and other health or medical facilities
  • Hotels, motels, and other lodging facilities
  • Marinas
  • Mines
  • Museums
  • Nursing homes, including assisted living facilities
  • Oil wells
  • Quarries, including gravel pits
  • Railroads
  • Sanitary landfills
  • Service centers (e.g., oil and lube, brake or transmission centers) with pits and in ground lifts
  • Sports arenas
  • Swimming pools
  • Tennis clubs
  • Theaters
  • Wineries

Sample Financing Breakdown for Special Purpose Projects

This breakdown would be for a project with total costs of $1 million

Entity Loan Amount Percent of Project Term Interest Collateral
Private Lender $500000 50% 10 years Market 1st Mortgage
CDC/SBA $350000 30% 20 years Below Market/Fixed 2nd Mortgage
Business/Borrower $150000 15% n/a n/a n/a

Startup Businesses

The SBA defines startup businesses as those that have been in operation for less than two years.  These businesses are eligible for SBA 504 loans; however, they require an additional 5% down payment. (Financing breakdown is same as table above)

Sample Financing Breakdown for Special Purpose Projects and Startup Businesses

This breakdown would be for a project with total costs of $1 million

Entity Loan Amount Percent of Project Term Interest Collateral
Private Lender $500000 50% 10 years Market 1st Mortgage
CDC/SBA $300000 30% 20 years Below Market/Fixed 2nd Mortgage
Business/Borrower $200000 20% n/a n/a n/a

We look forward to working with you on SBA 504 financing opportunities.

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