SBA 504 Loans: The Ins and Outs for Funding Your Business

Some types of small businesses have difficulty obtaining traditional bank loans. The Small Business Administration offers 504 loans to assist in the development of local communities by providing long-term fixed-rate financing for certain crucial assets of small businesses. Here are some important things to know about receiving funding through SBA 504 loans.

Eligible Businesses

To be eligible for SBA 504 loans, businesses must be for-profit companies that operate in the United States. They must have average net incomes of less than $5 million after taxes over two years, and their tangible net worth must be less than $15 million. The SBA requires the owners to be minorities, women, veterans, people from rural areas, or those from other specified backgrounds. The companies must focus on certain development areas and work with Certified Development Companies, or CDCs, which are nonprofit corporations set up to promote economic development by providing financing for small businesses. The SBA has a web page where you can find the CDC nearest you.

Uses for SBA 504 Loans

SBA 504 loans can be used to purchase existing buildings, purchase and improve land, construct a new facility, or improve an existing facility. They can also be used to purchase long-term equipment or machinery, or refinance debt related to purchasing or renovating land, buildings, or equipment. You are not allowed to use these loans to buy inventory or provide working capital for your business.

How to Obtain SBA 504 Loans

The first step in obtaining an SBA 504 loan is to get in touch with an SBA office to determine if your business is eligible. Next, use the SBA search webpage to contact a Certified Development Company in your area. Finally, put together all the documents required to submit your application.

For more information on SBA 504 loans, contact the Smart Capital Lending Group.


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