The SBA 504 Loan program was setup specifically to help small businesses grow, perhaps through modernization and upgrading, or simply by providing the means to fuel business expansion. Some of the assets most commonly acquired via an SBA 504 loan are real estate and major equipment needed to operate your business. Here are some things you should know about this very helpful loan program.


In order to be considered eligible for an SBA 504 loan, your business must be a for-profit business, and you must be able to produce a viable business plan, along with a credible management team capable of executing that business plan. You must already have applied for loans elsewhere (and been declined), you must demonstrate ability to repay the loan, and your business must be worth a total of less than $15 million.

How funds can be used 

Funds acquired through an SBA 504 loan must be used to purchase land, existing buildings, or equipment which you need to operate the business. It can also be used to upgrade infrastructure related to the business, such as parking lots, road or street upgrades, utilities, landscaping work, or rough grading. One other possibility would be to use the loan money for the modernization or renovation of facilities used by your business. The money cannot be used for investments in inventory or real estate, or for the consolidation or repayment of other debts incurred by your company.

Terms of repayment

The amount which you can obtain via an SBA 504 loan varies along with the purpose for which you are borrowing. The largest amounts which you can borrow will be associated with either small manufacturing initiatives, causes which somehow support public policy, or in some way contribute to the creation of new jobs. Since the amounts vary, the duration of repayment terms also varies, with the longest terms for repayment being associated with the largest amounts being loaned. Generally speaking, when borrowing for buildings or land, a 20-year term is standard, whereas a 10-year term is generally indicated for equipment or technology upgrades.