Understanding the 504a SBA Loan Program

The SBA 504 loan program is a fixed-rate financing program that provides funds for small businesses' major assets. The funds are produced by Certified Development Companies with the assistance of private lenders and the SBA.

Uses of the Funds

Proceeds of the SBA 504 loan program is limited. It can only be used to finance the purchase of land that is to be used for the business' operations. Costs of upgrading, construction, or renovation of building facilities, landscaping, parking lots, and other utilities are also covered. On the other hand, the fund is cannot be used to finance working capital or inventory, loan refinancing, and repayment or consolidation of debts.

Eligible Businesses

Small firms that meets the size standard set on the SBA guideline qualify for the SBA 504 loan program. A company that has a maximum net worth of $8.5 million and a net income not exceeding $3 million minus taxes within the two preceding years, can avail the fund. Meanwhile, businesses operating in speculation or investment in rental real estate cannot benefit from the said program.