The Small Business Administration’s 504 loan program helps existing small businesses afford capital investments for growth and revitalization to keep up with modern trends and customer demands. As part of an expansive list of SBA loan programs, the 504 loan is a long-term financing solution at fixed rates.
These SBA loans are distributed through Certified Development Companies. These companies receive certification from the SBA and face heavy regulations throughout the process. The Certified Development Companies work in partnership with lending institutions such as commercial banks to obtain funds for distribution. The SBA currently reports development companies nationwide. Each company operates in its own defined region.
A 504 SBA loan is comprised of several components. The Small Business Administration typically contributes 40 percent of the project cost for the capital investment. The Certified Development Company secures a lender to contribute up to 50 percent of the cost, and the small business must pay for at least 10 percent. In some cases, the borrower may have to pay up to 20 percent of the investment cost.
The funds obtained from a 504 loan are only eligible to finance fixed asset purchases. Small businesses can use 504 loans to purchase commercial buildings, land and landscaping or machinery. Other purposes for 504 loans include renovations and modernizations of existing facilities or refinancing existing debt that was used for these purposes.
504 SBA loans cannot be used to provide working capital, debt consolidation, inventory purchases or other operational funds. The payments are fixed, protecting the borrower from balloon payments, and the loan provides up to 90 percent of the funding needed for these business development investments.
To qualify for a 504 loan, a small business must meet the size standards defined by the Small Business Administration. For this loan program, the business must operate for profit and be within revenue and net worth standards determined by the SBA.
The amount you can borrow varies by application. The project that the funds are borrowed for is treated as the collateral for the loan. Contact UnsecuredBizLoan today for information about loans and project financing.
To apply for funding for your small business, use the form on the right to begin the application process.