504 Loan Program

by Ryan Kernan

The 504 Loan Program administered by the SBA is available to businesses that contribute to the economic development of their community. Find out what their unique features and criteria are here.

Another loan program administered by the Small Business Association, the 504 program contains several similarities to other SBA loans, but also some important differences.

Participants in the 504 program receive long-term, fixed-rate financing for fixed assets that enhance the economic development of a community. The focus on community development is an important feature of 504 loans. Loans made for 504 projects are done with the help of a Certified Development Company (CDC). A CDC is a nonprofit corporation whose mission is to contribute to the economic development of its community. Private sector lenders, CDCs, and the SBA work together to finance and guarantee portions of 504 loans.

Unlike other SBA loans, monies from the 504 program may not be used for working capital, inventory, refinancing or debt consolidation. Loan proceeds must be used for fixed asset projects such as purchasing land, machinery, or facilities.

The maximum amount of 504 loans is $1,500,000 when the following job creation criteria are met. For every $50,000 borrowed, one job must be created or retained. An additional $500,000 may be available for projects meeting a public policy goal, such as expanding exports or increasing productivity and competitiveness. See the SBA website for a complete listing of public policy goals.

In the case of small manufacturers, up to $4,000,000 may be available, with one job created or retained for every $100,000 received in financing, or with at least one public policy goal being met. In order to be eligible for a loan as a small manufacturer, business must have all of their production facilities located within the United States, and have the primary business classified in sectors 31, 32, or 33 in the North American Industrial Classification System. Further eligibility criteria apply not only to small manufacturers, but all businesses.

In order to qualify for a 504 loan, a business must meet the size requirements set by the SBA. The net worth of the business must be less that $8.5 million, with average net income at or below $3 million after taxes for the previous two years. No loans will be made to businesses who invest in rental real estate or engage in speculation.



Loans in the 504 program mature in 10 or 20 years, with interest rates pegged to the market value of US Treasury bonds. Fees on the loans are generally 3% of the total amount, and may be financed with the loan. As a rule, the projects being financed under the program are used as collateral on the loan, and personal guarantees of the business owners are also required.

For more information on the 504 program, or any of the loan programs offered by the Small Business Administration, visit www.sba.gov.

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