Understanding the SBA 504 Loan Program for Commercial Property Purchase

Apr 22, 2024

The Small Business Administration (SBA) 504 loan program is a powerful tool for small businesses looking to purchase commercial property. This program offers long-term, fixed-rate financing for major fixed assets, such as real estate and equipment, at below-market rates. Understanding the SBA 504 loan program can be crucial for small business owners looking to expand their operations or invest in property.

How the SBA 504 Loan Program Works

The SBA 504 loan program is a partnership between a certified development company (CDC), a lender, and the small business owner. The CDC provides 40% of the project costs, the lender provides 50%, and the small business owner contributes 10%. This structure allows for lower down payments and longer repayment terms, making it an attractive option for those looking to invest in commercial property.

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Eligibility and Benefits

To qualify for the SBA 504 loan program, the business must be a for-profit entity, have a tangible net worth of less than $15 million, and have an average net income of less than $5 million after taxes for the preceding two years. The benefits of this program include long-term, fixed-rate financing, lower down payments, and the ability to preserve working capital for other business needs.

Key Features of the SBA 504 Loan Program

One of the key features of the SBA 504 loan program is the ability to finance up to 90% of the total project cost, which can include the purchase of land, existing buildings, construction of new facilities, and renovation or expansion of existing facilities. Additionally, the fixed interest rate and long-term repayment options provide stability and predictability for small business owners.

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Application Process

The application process for the SBA 504 loan program involves working with a CDC to package and submit the loan application. The CDC will work with the small business owner to gather necessary documentation, such as business financial statements, personal financial statements, and a business plan. The lender will also review the application and determine the creditworthiness of the small business owner.


Understanding the SBA 504 loan program is essential for small business owners seeking to purchase commercial property. With its attractive financing terms, long-term stability, and lower down payment requirements, this program can be a valuable tool for business expansion and property investment.

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