The SBA 504 loan can be used to finance the purchase, construction, or improvement of fixed assets such as land, buildings, and equipment. It can also be used for renovations, modernization, and certain soft costs like professional fees. It cannot be used for working capital, inventory, or refinancing of short-term debt (except under specific refinance provisions).

There is no official minimum project size, but most Certified Development Companies (CDCs) prefer projects of at least $250,000. The maximum project size can exceed $20 million, but the SBA portion of the loan is capped at $5 million (or $5.5 million for manufacturers and energy-efficient projects).

Typically, the bank provides 50% of the project financing in a first lien position. This loan is structured according to the bank’s terms (rate, amortization, prepayment penalties) and usually carries a 10–25 year term.

The SBA, through the CDC, provides up to 40% of the financing in a second lien position. This loan has a fixed interest rate, fully amortized, with 10-, 20-, or 25-year terms depending on the project.

Reasonable bank fees, including packaging, underwriting, and some closing costs, can be included in the total project cost and financed through the SBA 504 structure.

SBA closing costs include a CDC processing fee, legal fees, SBA guaranty fees, and underwriting fees. These typically range between 2.5% – 3% of the SBA loan portion and can be financed into the loan.

Once the complete loan package is submitted, SBA approval usually takes 7–10 business days. The overall timeline from application to funding averages 45–60 days, depending on project complexity.

If purchasing an existing building, the business must occupy at least 51% of the space. If constructing a new building, the business must occupy at least 60% initially, with plans to occupy 80% within 10 years.

Yes. The property can be owned by an individual, partnership, or LLC and leased to the operating business. This is common in SBA 504 structures, provided the business is the primary occupant.

For all real estate projects, SBA requires an environmental investigation (Phase I Environmental Site Assessment). Depending on findings, a Phase II may be required.

A certified appraisal is required for all real estate projects. For equipment-heavy projects, an equipment valuation may also be required.

• Operate as a for-profit business in the U.S.
• Tangible net worth under $20 million and average net income after taxes under $6.5 million for the past two years.
• Must create or retain jobs or meet public policy goals (e.g., revitalization, minority-owned business support, energy efficiency).

The program offers low, fixed interest rates, longer repayment terms, lower down payments (typically 10%), and preserves working capital. It is especially attractive for businesses acquiring property or expanding facilities.

While SBA loans require additional documentation,  Lone Star provides step-by-step assistance. Borrowers typically submit tax returns, financial statements, business plans, and ownership documents.

• Land and building purchase
• Renovations and construction
• Equipment with a useful life of 10+ years
• Professional fees (architectural, legal, engineering)
• Appraisal and environmental costs
• Interim interest and soft costs

The SBA 504 loan rate is tied to the 10-year U.S. Treasury rate plus a spread. Rates are fixed for the life of the loan but are set only when the debenture is sold (funding date). Rates cannot be locked in advance.

Yes. SBA 504 loans are assumable with SBA/CDC approval, which can make selling your business more attractive.

Yes, but only if the borrowed funds are secured with personal assets (not the project assets) and repayment can be demonstrated without jeopardizing business operations.

No formal maximum project size, but the SBA loan portion is capped at $5 million (or $5.5 million for manufacturers and energy-efficient projects). The bank can finance beyond that if needed.

Yes. SBA 504 refinancing is allowed for qualified debt, provided the property is at least 51% owner-occupied and the debt being refinanced is at least 2 years old.

Yes. Equity injection may include:

• Cash
• Land or real estate already owned
• Equipment
• Site improvements already paid for

CDC partners like HBDI work with many SBA-approved banks. The best bank depends on your project size, industry, and location. We can help match you with a participating bank that aligns with your financing needs.