SBA 504 Loan Frequently Asked Questions
Expert answers to common questions about SBA 504 loans
General SBA 504 Loan Questions
What is an SBA 504 loan?
An SBA 504 loan is a commercial real estate and equipment financing program that combines a conventional bank loan with a CDC loan, backed by the Small Business Administration. It's designed to help small businesses purchase fixed assets with long-term, fixed-rate financing.
What can I use an SBA 504 loan for?
SBA 504 loans can be used for:
- Purchasing commercial real estate
- Constructing new facilities
- Renovating existing buildings
- Buying long-term machinery and equipment
- Refinancing certain existing business debts
How much can I borrow with an SBA 504 loan?
The SBA portion of a 504 loan can go up to $5.5 million, and there's no limit on the total project size. The typical structure is:
- 50% from a conventional lender
- 40% from the CDC (backed by SBA)
- 10% down payment from the borrower
Eligibility and Requirements
Who qualifies for an SBA 504 loan?
Basic eligibility requirements include:
- For-profit business operation
- Net worth under $15 million
- Average net income under $5 million after taxes
- Ability to repay the loan from cash flow
- Good character and credit history
- Management expertise and commitment
What credit score do I need?
While there's no strict minimum credit score requirement, most lenders prefer:
- Personal credit score of 650 or higher
- Business credit score showing good payment history
- No recent bankruptcies or foreclosures
- No current delinquencies on federal debt
Application and Process
How long does the approval process take?
The typical timeline from application to funding is 3-6 months:
- Initial application review: 2-3 weeks
- Underwriting process: 4-6 weeks
- SBA approval: 5-8 weeks
- Closing process: 2-3 weeks
What documents are required?
Key required documents include:
- Business and personal tax returns (3 years)
- Financial statements and projections
- Business plan and history
- Personal financial statement
- Real estate documentation (if applicable)
- Environmental studies (if required)
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