How Long Does It Take an SBA 504 Loan to Get Approved?
The length of time required for an SBA 504 loan to be approved can vary drastically, but averages between 60 and 90 days. With that being said, it may take up to six months in some situations. There is no hard and fast rule here, and each situation will be unique.Start Your Application and Unlock the Power of Choice$5.6M offered by a Bank at 6.1%$1.2M offered by a Bank at 6.0%$2M offered by an Agency at 5.6%$1.4M offered by an SBA Lender at 9%Click Here to Get Quotes!
504 Loan Approval Times: What You Need to Know
The length of time required for an SBA 504 loan to be approved can vary drastically, but averages between 60 and 90 days. With that being said, it may take up to six months in some situations. There is no hard and fast rule here, and each situation will be unique. Factors that go into determining the length of time to loan approval include:
Your ability to gather all required information
Your ability to satisfy all lender requirements for information and proof of income
SBA approval (up to 7 days)
Due diligence (2 to 3 weeks)
Closing (up to 14 days)
We’re here to help you get the commercial financing you need. Simply fill out the form below for a risk-free consultation and a free SBA loan quote!
How much paperwork is involved in an SBA 504 loan application?
The SBA 504 loan application process involves quite a bit of paperwork. You will need to provide the CDC and your lender with a wide range of documentation, including business and personal tax returns for the previous three years, personal history statement, personal financial statement, business financial statements for the previous three years, business debt schedule, and more. For a full list of the documents you will need to provide, please see this checklist.
What are the eligibility requirements for an SBA 504 loan?
In order to take out an SBA 504 loan, your business must meet the following eligibility requirements:
- Your business must be a for-profit organization.
- Your business must meet current SBA size standards.
- Your business’ net worth cannot exceed $15 million.
- Your business cannot earn 1/3 or more of its income from packaging SBA loans.
- Your business must earn an average of $5 million or less per year (after taxes, and only for the preceding two years).
- Your business cannot be engaged in any sort of passive or speculative activities.
Note that additional requirements may be placed by CDCs or conventional lenders. You can find a full list of eligibility requirements and other important information with the SBA here.
What are the advantages of an SBA 504 loan?
The SBA 504 loan program offers several advantages to businesses in need of purchasing fixed assets. These include:
- Lower interest rates than 7(a) loans and express loans
- Lower down payment requirements than 7(a) loans and express loans
- Long-term, fixed-rate financing used to acquire fixed assets for expansion or modernization
- Fully amortized without a balloon payment
- Terms for SBA 504 financing are typically 10, 15, or 20 years
For more information, please visit https://sba504.loans/sba-504-blog/what-is-the-sba-504-loan and https://www.sba.gov/offices/headquarters/ofa/resources/4049.
What are the disadvantages of an SBA 504 loan?
The disadvantages of an SBA 504 loan include:
- The involvement of a CDC, which often lengthens the process.
- They may not be used for working capital, consolidating debt, or purchasing inventory.
- There are significant paperwork requirements.
What are the different types of SBA 504 loans available?
The SBA 504 loan is used for economic development and cannot be used for working capital or inventory. This loan often offers a lower down payment, lower interest rates, and lower fees, depending on the size of the economic development project. SBA 504 loans are only available through the CDC and can be used for both owner-occupied and investment properties, with some conditions.