SBA 504 Loan

What is the 504-loan program?

SBA 504 Loans provide long-term, fixed-rate financing of up to $5 million for up to 25 years which can be used to purchase major fixed assets that support business growth and more employment.

504 loan funding comes through Certified Development Companies (CDCs) certified and regulated by the SBA, partially from banks and credit unions, and SBA’s community-based partners who regulate nonprofits and promote economic development within their communities.


Eligibility Requirements       

There are general SBA 504 loan requirements in order to qualify for them. They are:

  • Like 7(a) loans, businesses should operate for-profit in the U.S.
  • Have a tangible net worth of less than $15 million and have average net income of less than $5 million after deducting taxes for the past two years before the application date.
  • The eligibility requirements are pretty much the same as 7(a) loans possess. 

Other general eligibility standards include falling within SBA size guidelines, having qualified management expertise, a feasible business plan, good character and the ability to repay the loan.

Loans cannot be made to businesses engaged in nonprofit, passive, or speculative activities.

How do I use a 504 loan?

A 504 loan can be used to promote business growth and employment. These include the purchase or construction of existing buildings or land, machinery, equipment or new facilities. It can also be used for the modernization of: land, street, parking lots, etc.
A 504 loan cannot be used for working capital or inventory, consolidating or refinancing debt, or investment in rental real estate. Other loan options such as 7(a) loans can be considered for these purposes instead.
Sources: 504 Loans