What You Need to Know About SBA 504 Loans



The Small Business Administration, also known as the SBA, was created to help small business owners start up, run, and manage their venture. One of the areas where this administration assists is funding. The SBA offers grants and different types of loans to qualifying entrepreneurs to help them with financing their business, and the SBA 504 loans are a wonderful way to secure funding for your business needs.


The purpose of SBA 504 loans is two-fold: help the business owner and his or her community. These loans are not for just anyone. Rather, they are for businesses that are opening to strengthen their local economy. As such, you must do business in the United States or one of its territories and your business must be of benefit to your community and designed to boost its economy.


The SBA works in tandem with many for-profit and nonprofit resources with which small business owners can secure funding. In the case of 504 loans, a nonprofit Certified Development Company, or CDC, is involved and has been specifically set up to improve the economic development of its area. You will be working with a CDC to start your business in your community, and you may also qualify because you are a minority-owned entity. This includes being a veteran-owned company or woman-owned business.

Additional Qualifications

You must also qualify financially yourself. When applying for SBA 504 loans, business owners must provide personal and professional financial statements to support their need for cash. At publication date, if your business’ net worth was less than $15 million and your net income less than $5 million over the last two years, you meet the financial qualifications needed to apply for this funding. That is, if you don’t have any other funding resources available to you. If you have other ways of funding your business venture, including personally, you likely won’t qualify for SBA 504 financing.

Some Other Considerations

In addition, you must use the money to purchase a tangible asset, such as office space or property to run your venture. The lender will require a complete business plan, including financials and profit projections showing your ability to pay the loan back, and you must also demonstrate previous business management experience.

These are just the basic facts about SBA 504 loans. This type of funding, and the many other options available through the Small Business Administration have one purpose only, and that is to help you realize your entrepreneurial dreams, whether that be to start your own company or expand into bigger and better things.