The Top 5 Business Types Taking SBA 504 Loans in 2023
Looking at the Small Business Administration’s data set for SBA 504 loans, we’ve highlighted the top five business types using these low-interest, competitive loans.
SBA 504 loans are extremely attractive for a variety of businesses — and for a variety of reasons. They can finance your small business’s purchase of land, an existing structure, or equipment. This financing is also available for major renovations and even constructing a new facility for your business.
Even better, many businesses are eligible for SBA 504 financing. We examined the Small Business Administration’s data set from the first quarter of 2023 to see which business types are the most frequent users of SBA 504 loans.
The Top 5 Business Types Using SBA 504 Loans
Rank | Business Type | Q1 2023 SBA 504 Volume ($MM) | Q1 2023 SBA 504 Loan Count |
|---|---|---|---|
1 | Hotels and motels | $151.9 | 54 |
2 | Restaurants | $103.1 | 105 |
3 | Child Day Care Services | $52.5 | 35 |
4 | Car Washes | $39.7 | 17 |
5 | Trucking Companies | $35.4 | 17 |
5. Trucking Companies
Trucking companies — a category which includes both long-haul and short distance freight transport businesses — were approved for $35.4 million in SBA 504 loans during the first quarter. The average loan amount was $2.1 million.
It’s hardly surprising that trucking company owners are tapping SBA loans to help grow their businesses. The shipping industry is massive, while simultaneously also being in huge demand. Consider the growth of e-commerce businesses. Those companies greatly rely on local, regional, and nationwide freight companies to get their products from warehouses to paying customers.
4. Car Washes
Car washes landed fourth on our list, with 17 loan approvals adding up to $39.7 million between January and March. That puts the average loan amount right around $2.3 million.
Why do car wash companies find these loans so attractive? Consider the industry: Every car wash operator needs a facility, and these are nearly always purpose built. That means starting a business goes hand in hand with owning or building the real estate you use. Building a car wash is no cheap undertaking, and the SBA 504 loan can play a pivotal role in getting business owners the capital they need.
3. Child Day Care Services
Daycare businesses rank third on the list. A total of 35 loans were approved in the first quarter, with an aggregate loan amount of $52.5 million.
So, what can a child care business do with an SBA 504 loan? Plenty. Not only can they finance the purchase or construction of a facility — an expensive undertaking — they can also be used for equipment. Depending on the size and scope of the business, that could include food service equipment, playground equipment, and even the tables, chairs, or desks used in classrooms.
2. Restaurants
Many restaurant owners are huge fans of SBA 504 loans. In the first quarter alone, the SBA approved more than $103 million in loans for both full-service and limited-service restaurant businesses across 105 loans. That’s an average loan amount of about $980,000.
Restaurants can frequently benefit from SBA loans in a variety of ways. Sure, they can be used to purchase or build a restaurant, but more often they are utilized to finance significant renovations, replace kitchen equipment, and more.
1. Hotels and Motels
Hotels and motels had the highest volume of approved SBA 504 loans in the first quarter, with 54 loans totaling $151.9 million — an average of $2.8 million per loan.
Renovating a property, increasing the number of guest rooms, or even updating amenities are all uses that are broadly covered under the SBA 504 loan’s permitted uses. What’s more, even constructing a new hotel can qualify for this financing. Thirteen of those 54 loans had amounts greater than $4 million, which means they were likely used to either build or acquire a property.