COVID-19 relief options and additional resources
LEARN MORE Close

Test
Banner text.

CDC/504 Loan Program Eligibility

To be considered for Certified Development Company(CDC)/504 loan, applicants must meet these eligibility requirements: 

  • Operate as a for-profit company 
  • Do business (or propose to) in the United States or its possessions 
  • Has a tangible net worth less than $15 million and an average net income less than $5.0 million after taxes for the preceding two years.
  • Loans cannot be made to businesses engaged in speculation or investment in rental real estate.
  • Be an eligible type of business. While the vast majority of businesses are eligible for financial assistance from the SBA, some are not.
  • Under the 504 Program, Plan to use proceeds for an approved purpose. CDC/504  loan proceeds may be used for the financing of fixed assets like real estate or equipment. This list explains Eligible and Ineligible Use of Proceeds.
  • Not have funds available from other sources. SBA does not extend financial assistance to businesses when the financial strength of the individual owners or the company itself is sufficient to provide all or part of the financing. Both business and personal financial resources are reviewed as part of the eligibility criteria. If these resources are found to be excessive, the business will be required to use those resources in lieu of part or all of the requested loan proceeds.
  • Ability to repay the loan on time from the projected operating cash flow of the business
  • Good character. SBA obtains a "Statement of Personal History" from the principals of each applicant firm to determine if they have historically shown the willingness and ability to pay their debts and whether they have abided by the laws of their community
  • Relevant management expertise
  • Feasible business plan

The types of businesses that are eligible for financial assistance from the SBA, must:

  • Operate for profit
  • Be engaged in, or propose to do business in, the United States or its possessions
  • Have reasonable owner equity to invest
  • Use alternative financial resources, including personal assets, before seeking financial assistance

Special Considerations

Special considerations apply to some types of businesses and individuals, which include:

  • Franchises are eligible except when a franchiser retains power to control operations to such an extent as to equate to an employment contract. The franchisee must have the right to profit from efforts commensurate with ownership.
  • Recreational facilities and clubs are eligible provided: the facilities are open to the general public, or in membership-only situations, membership is not selectively denied or restricted to any particular groups
  • Farms and agricultural businesses are eligible. However, these applicants should first explore Farm Service Agency (FSA) programs, particularly if the applicant has a prior or existing relationship with FSA.
  • Fishing vessels are eligible. However, those seeking funds for the construction or reconditioning of vessels with a cargo capacity of five tons or more must first request financing from the National Marine Fisheries Service.
  • Medical facilities including hospitals, clinics, emergency outpatient facilities, and medical and dental laboratories are eligible. Convalescent and nursing homes are also eligible, provided they are licensed by the appropriate government agency and they provide more than room and board.
  • An Eligible Passive Company (EPC) is a small entity that does not engage in regular and continuous business activity. An EPC must use loan proceeds to acquire or lease, and/or improve or renovate real or personal property that it leases to one or more operating companies for use in the operating company's business. .
  • Change of ownership . Loans for this purpose are eligible provided the business benefits from the change. In most cases, this benefit should be seen in promoting the development of the business or, perhaps, in preserving its existence.
  • Legal aliens are eligible; however, consideration is given to status (e.g., resident, lawful temporary resident) in determining the businesses’ degree of risk.
  • Probation or parole . Applications will not be accepted from firms in which a principal is currently incarcerated, on parole, on probation or is a defendant in a criminal proceeding. Judgments are made on a case-by-case evaluation of the nature, frequency, timing of the offenses, and disposition of the offenses. Fingerprint cards are required only when a felony offense is disclosed.

Ineligible Businesses

Ineligible businesses include those engaged in illegal activities, loan packaging, speculation, multi-sales distribution, gambling, investment or lending, or where the owner is on parole. Specific types of businesses not eligible include:

  • Real estate investment firms when the loan is used for investment purposes.
  • Firms involved in speculative activities that develop profits from fluctuations in price rather than through the normal course of trade, such as wildcatting for oil and dealing in commodities futures, when not part of the regular activities of the business.
  • Dealers of rare coins and stamps .
  • Firms involved in lending activities, such as banks, finance companies, factors, leasing companies, insurance companies, and any other firm whose stock in trade is money.
  • Pyramid sales plans , where a participant's primary incentive is based on the sales made by an ever-increasing number of participants.
  • Firms involved in illegal activities.
  • Gambling activities , including any business whose principal activity is gambling. The rule does not restrict loans to businesses that obtain less than one-third of their annual gross income from either the sale of official state lottery tickets under a state license, or legal gambling activities licensed and supervised by a state authority.
  • Charitable, religious, or other nonprofit or eleemosynary institutions, government-owned corporations, consumer and marketing cooperatives, and churches and organizations promoting religious objectives .