Small Business Administration (SBA) 504 loans offer affordable financing to small businesses for financing large equipment or real estate purchases. Because of their low interest rates and long loan terms, this type of small business loan is an ideal option for owners who need to make large purchases.
Like other small business loans provided by the government, SBA 504 loans have stringent qualification requirements, a long application process, and a closing period of up to several months.
Here’s how SBA 504 loans work and the requirements you need to meet in order to qualify.
Before we jump into the requirements for qualifying for an SBA 504 loan, let’s go over an important distinction: SBA 504 loan versus 7(a) loan. It’s not uncommon to mistake one for the other.
Although both types of business loans are guaranteed by the U.S. Small Business Administration, the loan amounts and permissible uses differ. Generally:
Although there are some gray areas between the two loans, it’s often clear which one is right for you. Be sure to always speak to a finance professional if you feel unsure about which business loan matches your needs.
If you’d like to learn more about SBA 7(a) loans, here’s a great article that provides a general overview and the requirements for qualification.
In order to attain the funds offered by an SBA 504 loan, businesses need to meet both general and specific requirements.
Regardless of the SBA lender or loan program, you will need to meet the general list of qualifications, including:
In addition to the general requirements, business owners seeking an SBA 504 loan should only seek this option if they intend to fund a fixed-asset purchase. Commonly, these purchases are real estate or large equipment.
Additionally, the SBA requires that any real estate purchases through 504 financing are owner-occupied. At a minimum:
Navigating the SBA 504 loan requirements can be tricky, especially because they can vary by industry. By consulting with a financial expert from one of the Crews family of banks, you’ll benefit from the expertise that we’ve established with over a century of helping businesses and communities grow.
If you think an SBA loan is right for you, we’ll find the right one for your situation. To learn more about our other resources for small businesses, give us a call today. We’re here to help.
Vice President and Commercial Banker
Andrew, a native Floridian who was born and raised in Hardee County, joined Wauchula State Bank in 2013. He holds a bachelor’s degree in business from South Florida State College and is a graduate of the Florida School of Banking. Andrew’s focus is on helping his customers grow their business and partnering with them on their commercial needs. He loves spending time with his wife, son and other family. He enjoys outdoor activities, including fishing and being out on the water.