The SBA 504 Loan has three components:

1) direct commercial loan from the private sector covering 50 percent of the project, and secured by a senior lien.

2) a loan secured with a junior lien from a CDC (like us at BFC) covering up to 40 percent of the cost, and backed by a 100 percent SBA-guaranteed debenture.

3) a contribution of at least 10 percent equity from your business.

That said, this type of SBA loan has some specific requirements that businesses have to meet in order to qualify: your business has to meet a certain job creation criteria or a community development goal, as well as public policy goals.

Generally, a business must create or retain one job for every $65,000 provided by the SBA except for “Small Manufacturers” which have a $100,000 job creation or retention goal. If a project does not meet the jobs requirement, it may also qualify by meeting a public policy goal.

Public Policy Goals:

  • Revitalizing a business district of a community with a written revitalization or redevelopment plan;
  • Expanding exports;
  • Expanding small businesses owned and controlled by women;
  • Expanding small businesses owned and controlled by veterans (especially service-disabled veterans);
  • Expanding minority business development;
  • Aiding rural development;
  • Increasing productivity and competitiveness (retooling, robotics, modernization, competition with imports);

Community Development Goals:

  • Improving, diversifying or stabilizing the local economy;
  • Stimulating other business development;
  • Bringing new income into the community;
  • Assisting manufacturing firms (North American Industry Classification System (NAICS), Sectors 31 to 33) and all of its production facilities located in the United States; or
  • Assisting businesses in Labor Surplus Areas;

(Proceeds from 504 loans must be used for fixed asset projects which include: purchase of an existing building, construction of a new facility, or modernization, renovation or conversion of existing facility, grading, street improvements, utilities, parking lots and landscaping; and/or purchase of long-term machinery and equipment. The 504 Program cannot be used for working capital or inventory, or for any other non-fixed asset purposes. Debt refinancing is eligible under certain circumstances.)

At BFC, we don’t expect you to know right away which of the above goals your business will qualify for! We encourage you to reach out and are happy to answer any questions you may have about any of the Goals listed above. Call us at 1-800-BFC-REAL or email Jacky Dilfer at today.