SBA Loans: the 504 Loan Program

January 30, 2015
building remodel

The Small Business Administration's (SBA) 504 Loan program is for small businesses needing to acquire major fixed assets, to expand, to modernize, or to construct a new facility. This program provides long-term, fixed-rate (up to 20 years) financing to encourage community growth and business expansion. SBA 504 loans can only be used for fixed assets such as:

  • Real estate, both existing buildings and new construction
  • Improvements and upgrades. This can include street grading, parking lots, landscape, etc.
  • Remodel or conversion of existing facilities.
  • Purchase of machinery and equipment needed long-term.

The three parts to a 504 Loan

  • Part one: A loan secured with a first mortgage from a private-sector lender covering up to 50% of the project cost.
  • Part two: A second mortgage secured with a junior lien from an SBA certified development company covering up to 40% of the cost. (This is 100% backed by the SBA)
  • Part three: A contribution from the small business owner of at least 10% equity for the cost of the project.

With SBA 504 loans borrowers can finance up to 90% of appraised property value. They can also include the eligible refinancing costs. To be eligible for a 504 loan, a business must operate for profit, and fit the size guidelines set by the SBA for the 504 program. This means tangible net worth can’t exceed $15 million, net income can’t exceed $5 million after taxes. In addition, 504 loans can’t be made to businesses that speculate or invest in rental real estate.

For even more information about 504 Loans, check out 504 Loan Resources from and NEDCO. If you have any questions about how an SBA Loan can work for your business, I'm here to help.

  • Business
  • Running a Business
  • Small Business
  • Small Business Loan

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