Stop paying your landlord’s mortgage. How the SBA 504 works.
By the AceTheSBA team
If your business pays rent on the building it operates from, the SBA 504 program exists for you. It finances owner-occupied real estate and major equipment with a long-term fixed rate on a large part of the cost.
The structure
- At least 50% from a bank, with a first lien
- Up to 40% from a Certified Development Company (CDC), at a fixed rate for 10, 20 or 25 years
- At least 10% from you, rising to 15% for a new business or a special-purpose property, and 20% if both apply
The rules that decide eligibility
- Occupancy: your business must occupy at least 51% of an existing building, or 60% of new construction. You can lease the rest.
- Limits: the CDC portion can be up to $5 million, or $5.5 million per project for small manufacturers and energy projects. The bank’s share is not capped, so total projects can be larger.
- Jobs: each project creates or retains one job per $95,000 of the CDC loan ($150,000 for small manufacturers and energy projects), or meets a community development or public policy goal.
- Uses: land, buildings, construction and equipment with a useful life of at least 10 years. Not working capital, inventory or investment property.
The lender’s view
A 504 involves two lenders, a bank and a CDC, and both review your file. The same preparation applies: three years of financial statements and tax returns, a personal financial statement for each 20% owner, and a project budget backed by quotes or a purchase agreement.
Your move this week
Where do you stand?
The SBA Readiness Report matches your business to the right program, 7(a), 504, Express or Microloan, based on what you want to finance and how much you need. Six minutes, $19.99.
This week’s tool
Builds a 504 project budget and checks the structure and your contribution against SBA limits.
$19.00