Uses of Proceeds

What are the Permitted Uses of 504 Loan Proceeds?

  • Acquisition of land and building
  • Acquisition of vacant land for construction of a building
  • Construction of a building
  • Renovation of building; addition to building
  • Acquisition of heavy duty machinery & equipment
  • Acquisition of a commercial vessel  
  • Associated soft costs: title searches & insurance; attorneys fees; appraisals; environmental reports; architects; permits;surveys; installation of machinery; points on bridge loans, small amount of furniture and fixtures, etc.
  • Not permitted are mortgage broker fees; points on permanent financing
  • Leasehold improvements (only in certain cases)
  • Refinancing is permitted only in certain cases

Eligibility Guidelines:

  • Organized as a for-profit business. 
  • Legal entity-corporation, partnership, sole proprietor, limited liability company.
  • Any type of legitimate business- manufacturing, wholesale, service, professional service or retail.
  • Located in or planning to locate in any area of the United States.
  • Small business - either: net worth under $15 million & net profits after taxes under $5 million or meet SBA's other size standards (by sales or number of employees depending on NAICS code).
  • Planning to use the loan proceeds for capital investment (land, building, leasehold improvements, renovation, construction, machinery & associated soft costs). The SBA 504 loan program is not a working capital program. See uses of loan proceeds section for more details.
  • Another lender must be willing to participate in the financing. The SBA 504 loan finances up to 40% of the total project cost and the other lender finances 50%. The business or its owner typically puts in 10%. Economic development goals must be achieved through the project being financed. See section on economic development requirements.
  • Owner-user of the project being financed (51% occupancy if existing building; 60% occupancy if new construction) Two or more unrelated small businesses may receive a 504 loan to buy or construct a building as long as they, together, will occupy at least 51% an existing building or 60% of new construction.

Companies that are not eligible for SBA 504 loans are:

  • Not-for-profit businesses 
  • Businesses engaged in lending (such as banks, finance companies)
  • Passive holders of real estate and/or personal property
  • Life insurance companies -- however an insurance agency is eligible
  • Businesses located in a foreign country or owned by aliens
  • Businesses selling through a pyramid plan
  • Illegal businesses
  • Businesses which restrict patronage
  • Government owned entities (excluding Native American Tribes)
  • Businesses engaged in promoting religion
  • Consumer and marketing cooperatives (producer cooperatives are eligible)
  • Businesses engaged in loan packaging
  • Businesses owned by persons of poor character
  • Equity interest by lender, CDC or associates in applicant concern
  • Businesses providing prurient sexual material
  • Businesses that have previously defaulted on a Federal loan
  • Businesses engaged in political or lobbying activities
  • Speculative businesses.




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