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An SBA 504 loan is a financing tool designed to help healthy, growing businesses with affordable long-term, fixed-rate financing for major fixed assets, such as land and buildings. It also provides an economic development incentive within a community.
Program Contact:
Carlos Gutierrez
Director, SBA Program
cgutierrez@acciontexas.org
504 loan program has stated public policy goals
The 504 loan program, which is only available through us in Texas at this time,
strives to meet economic development financing objectives, such as:
• Business district revitalization
• Expansion of exports
• Expansion of minority business development
• Rural development (communities under 25,000)
• Increasing productivity and competitiveness
• Expansion of small business opportunities for women and veterans
Loan amounts range according to eligibility level
Your eligibility level depends on your project goals:
Eligible entity:
• From $300,000 total project cost to $12,410,000 total project cost
• SBA/CDC maximum portion $5,000,000
Eligible entity meeting the small manufacturers criteria:
• Maximum project cost $13,650,000
• SBA/CDC maximum portion $5,500,000.
How the SBA 504 loan program works
SBA 504 loans involve a lending partnership. Typically, a 504 loan is a
two-tiered financing partnership between you, a financial institution and
ACCION Texas-Louisiana through the SBA 504 program.
The bank’s role
A private-sector lender – usually a bank or financial institution – will finance
about half of the project cost and will take a first lien on the project assets
(without any SBA guarantee). There is a required term of 10 years and
this lender may set its own rates.
The SBA’s part
The SBA provides a 100% guaranteed debenture that finances up to 40% of the
project costs and is secured by a subordinate lien on the project assets. This
part of the loan has a term from 10 or 20 years and is a fixed-interest loan.
Borrower’s injection
You, as the borrower, generally provide the balance of the project
cost – about 10%, and this can be in:
• Cash
• Equity in real estate
• A loan
If you’re planning a limited-use facility or are a start-up business, the
amount is usually higher at 15%, and if both a limited-use facility and
a start-up business, you’re looking at a 20% injection.
Eligibility is clearly outlined
To qualify, you must be:
• An operating business
• Organized as a for-profit entity
• Located in the United States
- A small business that fits program standards
- Tangible net worth of no more than $7 million
• Net profit after tax of no more than $2.5 million
• Meeting an economic development objective
• Able to create or retain one full-time equivalent job for every $50,000
of the SBA portion of the loan.
Non-eligible businesses for SBA 504 loans
You don’t qualify if you are:
• A nonprofit institution
• A finance business
• A real estate development business
• A pyramid sales distribution network
• A government-owned entity
• A business in political or lobbying activities
• A businesses engaged in teaching, instructing, or counseling religious beliefs
• A business engaged in any illegal activity.
Eligible uses of the funds
You can use the loan to:
• Acquire land
• Make land improvements
• Purchase one or more existing buildings
• Remodel, convert, expand or renovate existing buildings
• Construct a new building.
• Acquire machinery and equipment (which should have a 10-year useful life).
Non-eligible uses of funds
You may not use a 504 loan for:
• Working capital
• Equipment or furnishings with a less than 10 year useful life
• Automobiles, trucks, airplanes
• Advertising
• Franchise fees.
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step of the way – even
with putting your
business plan together.
At ACCION Texas-
Louisiana, we’re
on your side.
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