Understanding SBA 504 Loans

The SBA 504 program provides loans for small businesses in development areas. These loans are typically administered to help businesses owned by women, minorities, veterans, and rural businesses. Not every business owner will qualify so it’s important to know the regulations and to also apply so that you know where you stand.

What’s the Purpose of a 504 loan?

The 504 program provides long-term financing assistance to areas that are currently being developed. It’s a fixed rate so businesses aren’t subject to any sort of fluctuation that could be financially harmful to their business or take advantage of their business. By providing financial assistance to these businesses within these developing communities, the communities will hopefully flourish and become more established.

Who Will Qualify for an SBA 504 Loan?

Only certain demographics qualify for this type of loan. First of all, if you are a woman, minority, or you own a business in a rural area, your odds of qualifying for the loan are higher than other demographics. Also, if you own a business in an area that has been designated as a development area and you are also working with Certified Development Companies, you may qualify. Finally, you will also need to meet the characteristics of a small business to qualify. SBA defines a small business as having a “tangible net worth less than $15 million and an average net income of less than $5.0 million after taxes for the preceding two years.”

Eligible Uses for a 504 Loan

Even if you qualify for the loan, there are regulations in place for what you can actually use the loan to finance. SBA 504 loans can be used to: buy a building; build a new building or renovate an existing building; buy land for the sake of improving upon it; buy machinery to be used in the long term; or refinance debt related to building upon your current business.

What’s the Process Involved in Applying for a 504 Loan?

So, you’ve done your research and you think you qualify for a 504 loan? How do you actually apply for one? It’s recommended that you contact your nearest SBA office to find out for certain if you’re eligible for the loan. You will then need to contact a CDC (certified development company) and then finally, you will need to prepare the necessary documents.

SBA 504 loans can be a great form of financial assistance if you qualify and are planning to undergo any of the specified endeavors for your small business.


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