SBA 504 Loan Requirements

SBA 504 Loan Requirements

Your business may qualify for an SBA 504 loan if it’s operated for profit and meets both of these criteria:

  • Tangible net worth of less than $15 million
  • Profits after taxes (averaged over two years) of less than $5 million

If your business does not qualify under these SBA 504 guidelines, you may still qualify for an SBA 7(a) loan.

You can use an SBA 504 loan to:

  • Acquire land and construct buildings
  • Purchase an existing building
  • Make leasehold improvements with a useful life of at least 10 years
  • Acquire machinery and equipment

How you use the loan determines the length of the SBA loan term:

  • For machinery and equipment purchases or leasehold improvements: 10 years
  • For purchase of land, construction, or purchasing existing buildings: 20 years

SBA 504 Structure

Under the 504 program, two loans are issued. One is the loan from CB&T with the SBA issuing a separate loan. The structure for the 504 program, as a percentage of total project costs, is typically as follows:

  • 50% lender's loan
  • 40% SBA 504 debenture note
  • 10% capital injection from borrower

Note: Ineligible project costs are considered separate from total project costs. Therefore, the capital you may be required to contribute could be more than 10 percent.

The structure may differ based on the scope of the project. For example, for single-purpose buildings, SBA will require 15 percent of the project cost coming from the borrower. That would reduce the SBA’s loan to 35 percent of the total project costs.

A start-up business requires an additional 5 percent increase in the borrower's capital. Therefore, a start-up business that will use a single-purpose building (such as a gasoline station) would require 20 percent of the capital coming from the borrower.

Note: All loans and lines of credit are subject to credit approval. Restrictions apply, see banker for details.