Eligibility Requirements for the SBA 504 Loan Program

In order to take out an SBA 504 loan, your business must be eligible for the program. The eligibility requirements are pretty simple, though. In order to qualify, businesses must be for-profit enterprises, must not be above a certain size, and cannot be in engaged or involved in certain industries, such as lending money, gambling, speculation, or illegal activities. To help clarify things, we’ve created a quick and easy list to help you determine if your business qualifies for the program:

• 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.

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Related Questions

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 types of businesses are eligible for an SBA 504 loan?

Businesses that are for-profit, have a net worth below $15 million, create or maintain jobs, and have good credit and financial history are eligible for an SBA 504 loan. No non-profits, real estate investors, or religious institutions will qualify. Source and Source.

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.

Source: https://www.commercialrealestate.loans/blog/difference-between-sba-7a-and-sba-504-in-cre

How long does it take to get approved for an SBA 504 loan?

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)

According to this source, the estimated closing time for an SBA 504 loan is 45 days, though this process can significantly longer, depending on the individual circumstances.