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What is the 95 Rule for an SBA 504 Loan?



Small businesses are the backbone of the American economy, and the Small Business Administration (SBA) has been supporting them for decades. One of the most popular SBA programs is the 504 Loan program, which provides long-term, fixed-rate financing to small businesses for the acquisition of fixed assets such as land, buildings, and equipment. In this blog post, we will discuss the 95% rule for SBA 504 loans.


The 95% rule is a critical component of the SBA 504 loan program. It states that the SBA must finance at least 40% of the project's total cost, the participating lender must finance at least 50%, and the borrower must provide a minimum of 10% equity injection. However, if the project includes energy efficiency or renewable energy improvements, the equity injection requirement is lowered to 5%.


But what about the remaining 5%? That's where the 95% rule comes in. The rule states that the SBA can finance up to 95% of the total project cost if the borrower is a small manufacturer, a minority-owned business, or a business located in a low-income area. The borrower must meet one of these three criteria to qualify for the 95% financing.

Let's break down each of these criteria:

  1. Small manufacturer: A borrower is considered a small manufacturer if they meet the SBA's definition of a manufacturer and have no more than 500 employees.

  2. Minority-owned business: A borrower is considered a minority-owned business if it is at least 51% owned and controlled by one or more individuals who are socially and economically disadvantaged.

  3. Low-income area: A borrower is located in a low-income area if the project is located in a census tract with a poverty rate of at least 20%, or if the median family income in the area is at or below 80% of the statewide median family income.

By meeting one of these three criteria, borrowers can benefit from the 95% rule, which can make it easier for them to access the capital they need to grow their business. The rule allows borrowers to preserve more of their working capital and can reduce the amount of upfront cash they need to invest in the project.


The 95% rule is an important aspect of the SBA 504 loan program that can benefit small businesses that meet specific criteria. By allowing the SBA to finance up to 95% of the total project cost, the rule can make it easier for borrowers to access the capital they need to acquire fixed assets and grow their businesses. If you're a small business owner looking for financing to acquire fixed assets, consider exploring the SBA 504 loan program and the 95% rule.



Looking for capital for your Utah small business? Call Wasatch Business Finance at 385-799-6700 or visit www.wasatchcdc.com for more information.

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