What are some of the Permitted Uses of 504 Loan Proceeds?

• Acquisition of land and building

• Acquisition of vacant land for construction of building

• Construction of building

• Renovation of building; addition to building

• Acquisition of heavy duty machinery and equipment

• Refinancing of qualified debt (with or without expansion)

• Associated soft costs: appraisal fees; environmental reports; closing costs; architects fees; permits; surveys; installation of machinery and equipment; points on interim loans; small amounts of furniture and fixtures; etc.

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Eligibility Guidelines:

• Organized as a for-profit business

• Legal entity - corporation, partnership, sole proprietor, or 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 $20 million and net profits after taxes under $6.5 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, renovation, construction, machinery and associated soft costs. (The SBA 504 loan program is not a working capital program.) Call us for more details on what uses of loan proceeds can be included. In some cases, debt refinancing is eligible

• 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

• Owner must be 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% of an existing building or 60% of new construction

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Companies that are not eligible for SBA 504 loans are:

• Non-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 undocumented 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

• Businesses engaged in loan packaging

• Businesses owned by persons of poor character

• Equity interest by 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