To qualify for an SBA 504 loan, your for-profit U.S. business must meet size standards, have good character, a feasible plan, and demonstrate repayment ability, using funds for fixed assets (land, buildings, equipment) while meeting job creation/retention goals, with strict limits on net worth (under $15M) and average net income (under $5M after taxes for two years). You'll need a minimum 10% down payment, with more for startups, and must work with a Certified Development Company (CDC).
Net worth restrictions: Businesses that wish to obtain a 504 loan must have a net worth of less than $15 million. Average net income: To qualify for an SBA 504 loan, businesses must demonstrate an average net income of less than $5 million after taxes for the two years prior to the application.
SBA 504 loans aren't inherently "hard" but have specific, somewhat strict requirements, making them challenging if your financials or business structure aren't a good fit; they require good credit (around 625+), a solid business plan, demonstrated need (can't get funds elsewhere easily), and lower personal net worth/income, plus patience for the lengthy approval process (60-90+ days), often needing a strong down payment (10-20%).
What Are SBA 504 Loan Requirements?
You must be able to provide the SBA with personal histories for all principals in your company. You must have a business plan, and it must be deemed feasible. You must plan to occupy at least 51% of the building if it is an existing structure, and 61% of the building if it is new construction.
Just 10% Down Payment
Unlike conventional commercial loans requiring 25-30% down, SBA 504 loans need only 10% from you. The CDC provides 40% and a bank covers the remaining 50%.
The drawbacks of the SBA 504 Loan Program include:
The timeline for SBA 504 loan approval can vary, but on average, the process takes between 30 and 90 days from application to initial funding approval.
504 loans are available through Certified Development Companies (CDCs), SBA's community-based nonprofit partners who promote economic development within their communities. CDCs are certified and regulated by SBA. The maximum loan amount for a 504 loan is $5.5 million.
A $20,000 loan over 5 years (60 months) costs roughly $2,600 to over $7,000 in interest, with monthly payments varying significantly by Annual Percentage Rate (APR), such as around $377 at 5% APR or $445 at 12% APR, meaning total repayment could range from approximately $22,600 to over $26,700.
Students Protected Under Section 504
Section 504 covers qualified students with disabilities who attend schools receiving Federal financial assistance. To be protected under Section 504, a student must be determined to: Have a physical or mental impairment that substantially limits one or more major life activities; or.
SBA 504 loans aren't inherently "hard" but have specific, somewhat strict requirements, making them challenging if your financials or business structure aren't a good fit; they require good credit (around 625+), a solid business plan, demonstrated need (can't get funds elsewhere easily), and lower personal net worth/income, plus patience for the lengthy approval process (60-90+ days), often needing a strong down payment (10-20%).
A student qualifies for a 504 plan if they have a physical or mental impairment that substantially limits one or more major life activities, like learning, walking, seeing, or concentrating, under Section 504 of the Rehabilitation Act, which is a broad civil rights law, not a list of specific conditions. Common qualifying conditions include ADHD, autism, diabetes, asthma, anxiety, dyslexia, vision/hearing issues, and temporary injuries, but eligibility is determined case-by-case, focusing on the impact on a student's ability to access education, not just the diagnosis.
Yes, you can get a 0% interest loan, commonly found as promotional offers for cars, furniture, or credit cards, but they usually have strict terms like a high credit score requirement and a limited time period, with high retroactive interest or fees if you miss payments or don't pay in full by the deadline. True 0% APR loans are different from "deferred interest" offers where all accrued interest is charged if the balance isn't cleared by the end of the promo. Always read the fine print for details on fees, timelines, and what happens if you're late.
Yes, a new LLC can get an SBA loan, but it's challenging as lenders often prefer established businesses (2+ years), requiring strong personal credit, a solid business plan, and sometimes collateral, though SBA microloans and certain 7(a) programs offer more flexibility for startups, focusing on the owner's creditworthiness and feasibility of the business idea.
If you need money now but can't get a loan, explore options like paycheck advances, borrowing from friends/family, selling items, 401(k) loans, or credit union emergency loans, while seeking grants through charities like Turn2Us or local council schemes (like calling 211 in the US) for non-loan relief, as payday loans carry extremely high rates and should be a last resort.
SBA 504 loans are used for fixed business assets, like buying commercial real estate, and often require at least a 10% SBA loan down payment towards the total project.
Go Local: Because 504 loans and CDCs are hyper focused on the impact your project will have on the local economy and business landscape, it is often better to look for a local bank or credit union that is SBA approved and willing to work with the 504 program.