An SBA 504 loan is a financing program offered by the Small Business Administration (SBA) designed to help small businesses secure real estate, equipment, or other fixed assets. These loans provide long-term, low-interest rate funding, with a portion of the loan provided by a Certified Development Company (CDC) and another portion by a traditional lender. This structure can be advantageous for businesses looking to acquire and develop real estate while conserving working capital.

To qualify for an SBA 504 loan, your small business must meet specific eligibility criteria, including being a for-profit enterprise, having a tangible net worth below $15 million, and a two-year operating history. The property you intend to acquire or construct must also meet certain requirements, such as job creation. SBA 504 loans are ideal for expanding businesses with a strong business plan.

SBA 504 loans can finance up to 40% of the project cost, with a maximum SBA debenture amount of $5 million. The terms can be as long as 25 years for real estate and 10 years for equipment purchases. These long terms and competitive interest rates make SBA 504 loans a powerful tool for small businesses looking to invest in real estate or major equipment acquisitions.

The timeline to secure an SBA 504 loan is typically longer than for SBA 7(a) loans, as it involves more complex underwriting and a two-step approval process. On average, it can take a few months to secure an SBA 504 loan, but having a well-structured business plan, and the right financial documentation, can help in the process. IBC streamlines this process for you, making it a smooth and efficient approach.

SBA 504 loans are primarily designed for financing real estate and equipment, so they do not support general business debt refinancing. However, there are certain limited circumstances where the SBA may allow debt refinancing, such as debt incurred for eligible energy efficiency improvements or to meet public policy goals. IBC can discuss these specific requirements with you and go over your options.