SBA 504 Loan Frequently Asked 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

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

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)