Your business must be operated for profit.
Under SBA 504 guidelines, a business is considered to be a small business if it meets both of the following size tests:
If your company does not meet these 504 size standards, the company can still be considered a small business if it meets the 7(a) size standards.
SBA 504 loan proceeds can be used for the following purchases:
Loan proceeds can also go towards the payment of professional fees directly tied to the loan request (i.e. architectural fees incurred for drawings of a proposed building), and some other administrative costs. However, listed below are ineligible project costs.
If your business falls within one of the following categories, it is ineligible for an SBA loan.
An SBA 504 loan has a term of either 10 years or 20 years. The proceeds determine the length of the loan.
Typically, the SBA 504 loan requires only a 10% injection into the project. Under the 504 loan product, two loans are issued. One is the loan from the lender, and the SBA issues a separate loan. The structure for the 504 product, as a percentage of total project costs, is typically as follows:
(Note: ineligible project costs are considered separate from total project costs. Therefore, your total injection could be more than 10%, as outside costs would have to be covered by you.)
The above structure changes based on the scope of the project. For example, the SBA will require a 15% injection from the borrower (reducing their loan to 35% of total project costs) on single-purpose buildings. A start-up business also requires a 5% increase in the borrower’s injection. Therefore, a startup business that will use a single-purpose building such as a gasoline station would require a 20% capital injection.