Frequently Asked Questions - The SBA 504 Loan

The 504 Loan Program is a U.S. Small Business Administration (SBA) funded program that provides financing to small and mid-sized businesses for the purchase of equipment and commercial real estate.

Business owners can use 504 loans for land and building purchases, new construction or renovation, leasehold improvements and purchases of heavy machinery, equipment and commercial vessels. They can also be used for soft costs such as title searches, attorney’s fees, appraisals, etc. Visit the SBA 504 Loan Program page for more information.

With low down payments and fixed, low, long-term interest rates, the 504 loan helps businesses retain working capital. It removes the uncertainty associated with refinancing and balloon payments, enabling long-term planning and business expansion. For lenders, the loan offers lower risk through shared financing, a low loan-to-value ratio and the ability to earn CRA credits.

Businesses must be for-profit enterprises with a tangible net worth not to exceed $15 million and net profit after taxes of no more than $5 million during the previous two years. The loans are available to individual business owners or multiple owners partnering on a project.

The 504 loan program serves a wide range of businesses, from auto repair shops to Internet companies, manufacturers, child care centers, law offices, hotels and motels, veterinary clinics and warehouses. Visit the Eligibility page for more information.

Typical 504 loan size varies from $100,000 to $5.5 million depending on eligibility and the job creation, community development and economic development goals met by the project.

Evergreen partners with lenders to provide up to 90 percent financing on a project. The partner lender typically provides 50 percent and Evergreen provides 40 percent. The borrower puts as little as 10 percent down, depending on the type of project. Visit the 504 Loan Structure page for more information.

To be eligible for a 504 loan, applicant businesses must meet at least one of many job creation, community development or public policy goals through their expansion projects. The goal(s) met determine the maximum amount of the 504 loan. Talk to your local loan officer to learn more about loan amounts as they relate to the following goals:

Job creation goals

• Jobs are created within two years as a result of the project
• Jobs are retained—if it can be shown that jobs would be lost to the community if the project was not completed

Community development goals

• Project will help to improve, diversify or stabilize the economy of the locality
• Project will stimulate business development in the community
• Project will bring new income into the community
• Applicant business is a manufacturing firm
• Applicant business is in a labor surplus area

Public policy goals

• A minority individual owns and controls 51 percent or more of the applicant business
• A woman owns and controls 51 percent or more of the applicant business
• A veteran owns and controls 51 percent or more of the applicant business
• Project is located in a business district of a community with a written revitalization or development plan
• Project will expand exports
• Project is located in a rural area
• Project is necessitated by federal budget cutbacks
• Project is required by a federally mandated standard or policy
• Project will increase productivity and competitiveness (retooling, robotics, or modernization)
• Project will reduce energy consumption by at least 10 percent
• Project will use sustainable design (LEED Standards)
• Project will produce renewable energy, micropower, or renewable fuels, including biodiesel and ethanol