Tap to get financing
SBA 504 Loans
SBA 504 Loans
Loan usesRequirementsDown paymentsRates and costsCalculatorApplication processCompare SBA loansSBA 504 RefinancingApplication ChecklistClosing ChecklistLoan AssumptionFrequently Asked Questions
Requirements Application process Calculator Blog
About
About usContact us
Get financing
Close sba504.loans is an independently owned and operated website and has no government affiliation. We are not the Small Business Administration and are not a lender. If you are trying to reach the SBA click here to be redirected.
Newly Published
Aug 26 at SBA 504 Loans
What Is SBA Form 159?
Aug 26 at SBA 504 Loans
What Is the Small Business Administration?
Aug 26 at SBA 504 Loans
What Is SBA Form 770?
Explore the Janover Network
Mar 27 at Multifamily Loans
Multifamily Minute Reader Reflections: Interest Rate Outlooks
Mar 24 at Multifamily Loans
The Best 3 Multifamily Loans for Affordable Housing in 2023
Mar 20 at Multifamily Loans
Multifamily Minute Reader Reflections: How Will Bank Failures Impact Multifamily?
Was This Article Helpful?
Last updated on Oct 18, 2022
3 min read

Loan Uses

Everything you need to know about approved and prohibited loan uses for the SBA 504 program.

Better Financing Starts with More Options Start Your Application and Unlock the Power of Choice. Click Here to Get Quotes →$1.2M offered by a Bank at 6.0%$2M offered by an Agency at 5.6%$1M offered by a Credit Union at 5.1%Click Here to Get Quotes
In this article:
  1. What Are the SBA 504 Loan Use Requirements?
  2. Approved Uses for 504 Loans
  3. What Uses Are Prohibited for 504 Loan Funds?
  4. Get Financing

What Are the SBA 504 Loan Use Requirements?

All SBA 504 loans have requirements in terms of what the funds can be used for, as well as prohibitions for use. In this article, we’ll take a look at what kind of businesses can use SBA 504 loans and what they can use them for.

Approved Uses for 504 Loans

You will find that an SBA 504 loan can only be used for some specific things. It is not the same thing as a general business loan, and there are more stringent requirements for the use of funds than with a conventional loan or a 7(a) loan. According to the SBA, the capital from a 504 loan can only be used for “fixed assets and certain soft costs”. These include things such as the following:

  • Purchasing an existing structure/building for your business

  • Purchasing real estate (land) on which to build.

  • Purchasing land improvements, including grading, paving, utility installation, etc. for the business, including new and currently owned properties.

  • Constructing new business facilities (whether as a business’ first home, or for expansion of an existing business).

  • Renovating existing business facilities.

  • Modernizing existing business facilities.

  • Converting existing business facilities.

  • Purchasing machinery for long-term business use.

  • Refinancing debt connected to business expansion (qualifying facilities and equipment).

As you can see, the 504 loan covers a very wide range of activities and considerations for businesses. Even if you operate a startup, or are planning to create a new business, a 504 loan may be the right way to go. However, there are some uses that cannot be funded with a 504 loan.

What Uses Are Prohibited for 504 Loan Funds?

There are specific requirements for using the funds from a 504 loan, but there are also specific prohibitions in terms of what your loan can be used to pay. The SBA specifically prohibits using the loan for:

  • Working capital

  • The purchase of inventory

  • Consolidating debt

  • Repaying debt

  • Refinancing

Note that there is a special 504 loan refinancing program in place designed to help business owners reduce their financial obligations. However, that is a separate loan subprogram, and we will discuss it later in this guide.

What Are the Minimum and Maximum Amounts for an SBA 504 Loan?

One of the most interesting things about the 504 loan program is that there is no maximum amount set. That is, the SBA does not set a cost ceiling for your project. However, CDCs are limited in terms of what they can lend, not only in terms of a percentage of your project, but also in dollar amount. There is also no minimum requirement. However, the SBA does have other loan programs designed for small dollar amounts. If you require a smaller amount for your business, you may find that a 7(a) loan, a microloan, or even a conventional loan is a better fit for your needs.

So, what are the maximum limits for CDCs? They are capped at 40% project funding, with a dollar amount of $5 million. However, if you operate a small manufacturing company, CDCs are allowed to loan up to $5.5 million per project. It should also be noted that there are no cumulative amount limits.

That is, you can take out a $5 million loan, and then if you embark on another qualifying project, particularly if you decide to go green, you can take out another $5 million loan. Theoretically, there is no limit to the number of 504 loans a business can take out, although all of them will need to meet use requirements, and the business must continue to meet eligibility requirements.

In this article:
  1. What Are the SBA 504 Loan Use Requirements?
  2. Approved Uses for 504 Loans
  3. What Uses Are Prohibited for 504 Loan Funds?
  4. Get Financing

Getting a small business loan should be easy.⁠ Now it is.

Click below for a free, no obligation quote and to learn more about your loan options.

Get financing →
Janover logo

SBA 504 Loans is a Janover company. Please visit some of our family of sites at: Multifamily Loans, Multifamily Today, Commercial Real Estate Loans, SBA7a Loans, CMBS Loans, Apartment Loans, HUD Loans, HUD 221d4 Loan, HUD 232 Loan, HUD 223f Loan, HUD 223a7 Loan, SBA Express Loans, SBA 504 Loans, and OpportunityZones Help.

Janover Inc.

6401 Congress Ave
Ste 250
Boca Raton FL 33487

[email protected]

Site Information

Privacy Policy
Terms of Use

This website is owned by a private company that offers business advice, information and other services related to multifamily, commercial real estate, and business financing. We are a technology company that uses software and experience to bring lenders and borrowers together.

All users should perform their own due diligence and research. Nothing on this website is an offer or a solicitation for a loan. This website does not endorse or charge you for any service or product. None of the information on this site constitutes legal advice. We are not affiliated with the Small Business Administration (SBA). If you need to visit the SBA directly please click here: sba.gov

Click here for our Advertiser Disclosure.

Copyright © 2023 Janover Inc. All rights reserved.