Small Business Administration (SBA) 504 loan is a wondrous small business loan opportunity for small businesses to gain the financial support they need to acquire working capital. Small businesses can borrow up to 90% of a project cost to purchase commercial assets such as the following:

  1. Existing buildings or land (real estate)
  2. New facilities
  3. Long-term machinery and equipment

Alternatively, a small business can use the loan to improve or modernize:

  1. Land, streets, utilities, parking lots and landscaping
  2. Existing facilities

Soft costs such as the following can be rolled into the loan:

  1. Architectural and legal fees
  2. Environmental studies
  3. Appraisals
  4. Interest and fees on the construction
  5. Interim bank financing

When a small business applies for a SBA 504 loan to acquire commercial real estate or make commercial purchases related to real estate, a small business goes through the following steps:

1. Determine its eligibility.
For a small business to qualify for a SBA 504 loan, the business must meet the following requirements:

  • Operate as a for-profit company in the United States or its possessions
  • Have a tangible net worth of less than $15 million
  • Have an average net income of less than $5 million after federal income taxes for the two years preceding your application
2. Determine the use of the loan.
A SBA 504 loan must be used for commercial purposes such as purchasing commercial real estate or equipment. The loan can’t be used for acquiring inventory, consolidating, repaying or refinancing debt, or speculating or inve