SBA 504

Transaction Size: There is no maximum project size. The SBA guarantees loans up to $5,000,000 with a maximum guaranteed loan amount of $3,750,000. There is no theoretical minimum, however, most lenders are reluctant to process commercial loans less than $50,000.

Processing Time: The loan processing time can vary.

The SBA 504 Loan program is an effective economic development loan program that offers small businesses an additional avenue for business financing, while promoting business growth, and job creation. The 504 Program provides growth stage businesses with long-term, fixed-rate financing for major fixed assets, such as land and buildings. It is a long-term financing tool for economic development within a community. 504 loans are made available through Certified Development Companies (CDCs), SBA’s community based partners for providing 504 Loans.

504 Loans are typically structured with SBA providing 40% of the total project costs, a participating lender covering up to 50% of the total project costs, and the borrower contributing10% – 20% of the project costs.

To be eligible for a 504 Loan your business:

• Must be operated for profit and fall within the size standards set by the SBA
• Have a tangible net worth not more than $15 million
• An average net income of $5 million or less after federal income taxes for the preceding two years prior to application.

Maximum Loan Amount (Debenture):

While there is no maximum project size, the maximum SBA loan amount (debenture) is $5 million. Small manufacturers or specific types of energy projects (as described in the energy project section) may qualify for a $5.5 million debenture.

Generally, a business must create or retain one job for every $65,000 guaranteed by the SBA. Small manufacturers must create or retain a ratio of one job for every $100,000. As an alternative to job creation or retention, your business may qualify if it meets a community development or public policy goal as long as the CDC maintains its portfolio job average requirements.

These include:

Modernizing or upgrading facilities to meet health, safety, and environmental requirements:

• Assisting businesses in or moving to areas affected by Federal budget reductions, including base closings, either because of the loss of Federal contracts or the reduction in revenues in the area due to a decreased Federal presence; or;
• Reduction of rates of unemployment in Labor Surplus Areas determined by the Secretary of Labor; or
• Reduction of energy consumption by at least 10 percent;
• Increased use of sustainable design, including designate that reduce the use of greenhouse gas emitting fossil fuels, or low-impact design to produce buildings that reduce the use of non-renewable resources and minimize environmental impact, or
• Plan, equipment and process upgrades or renewable energy sources such as the small-scale production of energy for individual buildings or communities consumption, commonly known as micropower, or renewable fuels producers including biodiesel and ethanol producers

Source: U.S. Small Business Administration