SBA 504 Loan Program Description

The 504 is the SBA’s economic development instrument that supports American small business growth and helps communities through business expansion and job creation. The SBA 504 loan program provides long-term, fixed-rate, subordinate mortgage financing for acquisition and/or renovation of capital assets including land, buildings and equipment. Virtually all types of for profit small businesses are eligible for this program. The SBA 504 loan is distinguished from other SBA loan programs in these ways:

  • Lower down payment; allows a business to conserve valuable operating capital by injecting a minimum 10 percent of total project cost. Injection amounts may be higher for new businesses or special purpose property.
  • Fixed interest rate; borrower knows cost of occupancy for the next 20 years.
  • Rate is usually below market rate.
  • All project costs can be financed, including acquisition (land and building, land and construction of the building, renovation, machinery and equipment) and soft costs such as title insurance, legal, appraisal, environmental and bridge loan fees. Closing costs may be financed.

Collateral is typically assets-financed; allows other assets to be free of liens and available to secure other needed financing. Long-term; real estate loans are 20-year term, heavy equipment 10- or 20-year term and are self-amortizing. The 504 program encourages banks and other lenders to make loans in first position on reasonable terms, helps them retain growing customers and provides Community Redevelopment Act credit. 504 program benefits the borrower’s community through job creation and retention. Businesses that receive 504 loans are:

  • Small – net worth under $15 million, net profit after taxes under $5 million, or meet other SBA size standards.
  • Organized as for-profit.

Any type of business – retail, service, wholesale or manufacturing. The SBA’s 504 Certified Development Companies (CDC’s) serve your community by financing business expansion needs. Their professional staff works directly with you to tailor a financing package that meets program guidelines and the credit capacity of your business.