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.

The SBA 504 loan program is specifically geared to help small businesses purchase real estate of all types, including existing buildings or empty land and funds for construction of the property. However, it is a requirement of all SBA loans that any real estate purchased must be owner-occupied. If you are purchasing an existing building, your business must occupy at least 51% of the available space. If you are purchasing land and having a building constructed, the SBA requires that your business occupies 60% of the new structure. That leaves 40% of the building for other purposes, including leasing or renting to other tenants.

To qualify for an SBA 504 loan, the business must be a for-profit small business, have a net worth that is below $15 million, create or maintain jobs, and have good credit and a good financial history.

The SBA 504 loan program is designed to help small businesses purchase real estate of all types, including existing buildings, empty land, and funds for construction of the property. This loan program offers a number of benefits for real estate investments, including:

• Low down payment: The SBA 504 loan requires only 10% down payment, which is much lower than conventional loans.
• Long-term fixed rate: The SBA 504 loan offers a long-term fixed rate, which helps protect businesses from rising interest rates.
• Flexible occupancy requirements: For existing buildings, the SBA requires that your business occupies at least 51% of the available space. For new construction, the SBA requires that your business occupies 60% of the new structure.
• No balloon payments: The SBA 504 loan does not require balloon payments, which helps businesses avoid large lump sum payments.

For more information on the SBA 504 loan program, please visit https://sba504.loans.

According to the SBA regulations, Investors are allowed to borrow anywhere between the minimum of $500,000 all the way up to $14 million — though investors would have to meet incredibly strict qualifications in order to be approved for this amount.

It’s important to understand that there are restrictions with these loans. For instance, the funds cannot be used to lease anything, nor can they be used as working capital. Borrowers looking for a source of working capital financing should instead look to the SBA 7(a) loan program, which, like the 504 loan program, offers loans in amounts of up to $5 million. Other SBA loan options include SBA express loans and SBA microloans. SBA express loans are a variant of the SBA 7(a) loan that can be approved faster. These loans are offered in amounts of up to $350,000. In comparison, microloans are loans designed for smaller, startup businesses, and are offered in amounts of up to $50,000.

The repayment terms for an SBA 504 loan for real estate investments are 10 to 20 years (fully amortizing) with a loan to value of up to 90% (80% on hotels and motels). The interest rate is a combination of the base Treasury rate, a fixed rate of 0.38% for 10-year loans and 0.48% for 20-year loans, and ongoing fees of approximately 1.7%. The rates are locked in with your contract and won’t change during the term, even if market rates do. The third-party portion of the loan is not required to be fixed, as the institution can have a variable rate, balloon payment, and more.