Eligible applicants for the SBA 504 program include for-proﬁt small businesses with a net worth less than $15 million and $5 million in proﬁt after taxes.
Acquisition of owner-occupied real estate (must occupy 51% of the building), new construction (must initially occupy 60% of the building), site improvements, building renovations, and machinery & equipment with a useful life of at least 10 years. Refinancing of existing commercial real estate and/or equipment debt may be eligible. Loans may not be used for working capital, venture capital, or investment purposes.
The gross amount of the loan can be up to $5 million for regular loans and $5.5 million for Public Policy Goal loans as well as small manufacturers or 40% of the total eligible project costs (whichever is less). Additional equity requirements will reduce the SBA participation amount. The minimum loan size is $50,000.
Interest rates are based on the sale of U.S. Treasury Bonds. Check here for the latest rates. The rate for a particular loan is not set until the project as defined is complete and the SBA 504 loan closes and funds. Once the rate is set it is fixed for the life of the loan.
- 10 years for machinery & equipment
- 20 years for real estate
- 25 years for real estate
Existing businesses (must be in operation for at least years) must provide a minimum of 10% of the total project cost. New businesses or new ownership of businesses must provide a minimum of 15% of the total project cost. If the project involves a special-use property, an additional 5% will be required. Equity in project real estate may, in some cases, be used.
SBA 504 vs Conventional Financing
Here’s how the financing would look for the purchase of a $1,000,000 commercial building assuming an existing small business (in operation for at least 2 years) and non-special use property. Use our SBA 504 Loan Calculator to estimate the monthly financing cost for your project.
- The lender provides 80% of the financing. In this example, $800,000.
- The amount of down payment required would be 20%. In this example, $200,000.
- The lender provides 50% of the financing. In this example, $500,000.
- The SBA 504 provides 40% of the financing as a separate loan. In this example, $400,000.
- The amount of down payment required would be 10%. In this example, $100,000.