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SBA 504 / 101: All About SBA 504 Loans and How to Grow Your Business With One.

Updated: Mar 24, 2023

What is the SBA 504 Loan Program?

The SBA 504 Loan program via the U.S. Small Business Administration provides a financing vehicle for businesses that want to grow operations with a low down payment of 10% and long-term, fixed interest rates.


What Can You Use an SBA 504 Loan for?

SBA 504 Loan financing can be utilized by a business for the following:

  • Purchase a building

  • Construct new facilities

  • Renovate a current property

  • Purchase heavy machinery or equipment

  • Refinance commercial mortgage debt

  • Get operating capital / refinance

What are the Borrower Benefits of the SBA 504 Loan Program?

The SBA offers a number of loan programs for small business owners that are designed to address various capital needs of a business. With the 504 program, the benefits to the borrower include:

  • Low, down-payment of 10%

  • Low, long-term, fixed interest rates (current rates)

  • Flexible underwriting terms

  • Payment stability

  • The ability for a business to preserve its working capital

  • A business can include soft costs such as furniture, fixtures and fees

What are the Eligibility Requirements for an SBA 504 Loan?

To qualify, a business must meet the requirements of a small business as defined by the SBA. These requirements include:

  • You must occupy 51 percent of the property within one year of funding (existing real estate).

  • For new construction, the business must occupy a minimum of 60 percent of the property.

  • The net worth of the business cannot exceed $15 million.

  • Post-tax profits for the last two years cannot exceed $5 million. Or, you can qualify via size standards based on the number of employees.

  • The personal net worth of the business owner is not a factor in determining eligibility.


How is the SBA 504 Loan Structured?

SBA 504 loans for are structured around a shared financing model. The basic structure requires the borrower to provide a 10% down payment. The SBA directly finances 40%, and a third-party lender, usually a bank, will finance the remaining 50% of the project.

How an SBA 504 Loan is Structured
SBA 504 Loan Structuring

What is a CDC?

A CDC (Certified Development Company), Wasatch Business Finance, is a non-profit organization specifically tasked with promoting economic development in the local business community via SBA 504 Loan facilitation between the SBA, the borrower and the lender. CDC's are certified and regulated by the U.S. Small Business Administration. Working with a CDC is a required component of the SBA 504 Loan process.


Frequently Asked Questions Regarding the SBA 504 Loan Program

What is my down payment on an SBA 504 loan?

The down payment is generally 10% of the total project cost and can include soft and closing costs. Startup businesses and special purpose real estate may require a larger down payment. In no event shall the required down payment exceed 20% of the total project cost.

What is the SBA 504 loan structure?

The required down payment is generally 10%. The lender finances 50% in a 1st Deed of Trust position and the SBA finances 40% in a second Deed of Trust position. Click here for more information.

Can I include closing costs in the loan amount?

Yes, closing and soft costs can be included.

Can I refinance an existing building loan?

Yes, the SBA allows for the refinance of most existing real estate loans.

Can I do a cash out refinance on an SBA 504 loan?

Yes, The SBA allows for cash out to support operating needs.

What is the definition of owner occupied?

A building is considered owner occupied when the owner occupies 51% or more of the total space. When construction is involved, the owner must occupy 60% of the total space.

Are startup businesses eligible?

Yes, startup businesses are eligible, but may be subject to higher down payments and underwriting restrictions.

Am I eligible for SBA 504 loan financing if I have tax liens?

No, an SBA 504 loan cannot be used to pay off tax liens and an SBA 504 loan cannot be approved when tax liens are present.

Do I have to create a real estate holding company?

The SBA requires that the real estate be held in a separate single purpose real estate holding entity. This is a structural requirement for SBA 504 financing.

Will the SBA finance franchise fees?

No, franchise fees cannot be included in an SBA 504 loan.

Will the SBA finance goodwill and intangible assets?

No, goodwill and intangible assets cannot be included in an SBA 504 loan.


SBA Program Success Stories...

Read all about businesses that have succeeded utilizing SBA Loan programs.


Interested in Growing Your Business with a 504 Loan?

SBA 504 Loans Utah
Your Utah SBA 504 Loan Experts

Wasatch Business Finance is your Utah CDC for all things SBA 504. Visit our website or call us at 385-799-6700 for more information. We are committed to you and to Utah business growth.

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