The 504 Loan Program Explained

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The 504 Loan Program Explained

By kmurray, Contributor and Moderator
Published: October 21, 2013 Updated: September 13, 2016

Are you looking to expand or modernize your small business? If you’re exploring your financing options, then SBA’s 504 Loan Program (or Certified Development Company (CDC) loan) may be for you. Designed especially to help small businesses grow, you can use funds to make purchases for real estate and equipment, just to name a few. Read on for more details to see if this is a good option for you.

Am I eligible?

In addition to operating your business for profit, you’ll need to have a feasible business plan and relevant management expertise to be considered eligible for a 504 loan. As with any business seeking SBA’s financial assistance, you’re also required to do business in the United States or its territories. And you must have tried to use other financial resources, including personal assets, before applying for a loan. Here are some other requirements to consider:

  • Your business must have a tangible net worth of less than 15 million dollars.
  • Your business must have an average net income less than $5 million after taxes for the preceding two years.
  • You must have the ability to repay the loan on time from the projected operating cash flow of your business.

How can I use the funds?

Loan funds can be used to:

  • Purchase land;
  • Purchase existing buildings;
  • Purchase long-term machinery and equipment;
  • Purchase improvements (including grading, street improvements, utilities, parking lots and landscaping); or
  • Build new facilities or modernize, renovate or convert existing facilities.

A 504 loan cannot be used for:

  • Working capital or inventory;
  • Consolidating, repaying or refinancing debt (although for a portion of the project, you may refinance debt associated with buying or renovating equipment or facilities); or
  • Speculation or investment in rental real estate.

What are the amounts and repayment terms?

Maximum loan amounts are determined by how they’ll be used ­– if they support goals associated with job creation, public policy or small manufacturing. The loan terms also vary. For land and buildings, the loan term is 20 years; it’s a 10-year term for machinery and equipment.

Think the 504 Loan Program might be for you? Find your local CDC and learn more about the application process today.


About the Author:

Katie Murray

Contributor and Moderator

I am an author and moderator for the the Community. I'll share useful information for your entrepreneurial endeavors and help point you in the right direction to find other resources for your small business needs. Thanks for joining our online community here at!


We are an autobody shop in Camden County New Jersey. We will be preparing to purchase a new facility within the next year. Does anyone know if a 504 loan is the appropriate loan for this purpose?
The 504 program help both small businesses renegotiate their debt and allow banks and other financing companies get rid of bad debt.That is a double-edged sword.
Great To know that the SBA still has this kinds of programs to help business owners.
SBA’s 504 Loan Program is a very usefull program. I am going to share it my colleagues, I think some of them can use it. It is very hard to grow small companies nowadays.
the 504 loan is a good program especially since it only allows you to use the money business and not other finances. good job on the article
504 loans are an important tool. Another important tool is the use of pretax money to stretch your buying power by up to 35%.
Again a good initiative by SBA to help small business holder by granting 504 loan, which can really establish a business better. But it would be interesting to see how small business holder relates to this opportunity.

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