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504 Eligibility Process

Qualifying Projects:

Generally, any project involving the purchase, construction, or improvement of fixed assets is eligible. Examples include:

  • Land and building acquisition
  • Construction and renovation
  • Purchase of heavy machinery or equipment
  • Refinancing real estate and equipmentReasonable contingencies (up to 10 percent), furniture and fixtures, and soft costs (such as professional fees and interest during construction) generally can be included. Investment and residential properties are not eligible.

Eligible Businesses:

  • Business owner(s) must be a U.S. citizen or lawful permanent resident alien
  • Business must be for-profit
  • Any business structure (Sole Proprietorship, Partnership, Corporation, LLC, LLP, etc.)
  • Any type of legitimate business: manufacturing, wholesale, service, professional service, retail or agricultural
  • By SBA definition, the business must be small. This generally means less than $15 million in tangible net worth and less than $5 million in annual profits after taxes including affiliates.

Ineligible Businesses:

  • Private restrictive clubs and speculative real estate investments
  • Businesses primarily engaged in lending (i.e. banks, credit unions, finance companies)
  • Insurance companies, although independent insurance agencies are eligible
  • Offshore facilities
  • Businesses that derive a significant portion of their revenue from speculative operations (i.e. commodity traders)
  • Lobbyists
  • Businesses with more than 1/3 of their revenue from legal gambling


  • The business must be for-profit. Business plus all affiliates must average less than $5 million in annual profits and $15 million in net worth.
  • Property must be currently owner-occupied or have intent to be owner occupied.
  • Property must be owned by an Eligible Passive Company (EPC). If no EPC is in place, then the Operating Company (OC) must own the property.
  • Project must promote economic development by creating jobs or meeting a public policy goal. Ex. women owned (51%), minority owned, veteran owned, etc.

504 Eligible Expenses:

Land & Land Improvements

The project may include land, no matter how long held. The value of the land will be at cost of the purchase price if, land was acquired within 2 years of the SBA 504 loan application. Current market value used when land is acquired over 2 years prior to SBA 504 application with a professional appraisal. Land improvements integral to the project can be included as eligible project costs.

Examples of eligible land improvements are grading, new streets including curbs, solar panels, retainage ponds, parking lots, utilities, and landscaping.

Building Construction

All construction expenses can be considered part of the SBA 504 project cost. When constructing a new building, the borrower must immediately occupy at least 60% of the rentable property with plans to occupy some of the additional space within three years and plans to occupy all of the remaining space (not leased out) on a long-term basis within 10 years.

A borrower may lease up to 20% of the square footage of the rentable property. However, the total square footage of all buildings or facilities must be used for business operations.

Building Renovations

All costs to acquire and improve an existing building are eligible for an SBA 504 loan, provided, the purchase price is supported by an appraisal acceptable to SBA.

For a building partially leased out, costs for improvements integral to the structure of the building are eligible project costs. Examples include facade expenditures, heating, electrical, plumbing and roofing costs. However, costs in connection with finishing the interior space to be leased out are not eligible.

Furniture and Fixtures

Furniture and fixtures may be included in the project cost if the dollar amount compared to the total project is minimal (less than 10%) and will not affect the maturity based upon a weighted average useful life.

Machinery and Equipment

Expenses associated with the purchase, transportation, dismantling, or installation of machinery and equipment may be considered part of the project cost. Example, a machine which typically requires a specialty moving service.

For machinery and equipment only projects, the machinery and equipment must have a remaining useful life of at least 10 years.

Professional Fees

Expenditures for professional services and fees directly attributable and essential to the project are eligible.

  • Appraisal
  • Environmental
  • Architectural fees
  • Engineering fees
  • Certificates of Occupancy and Completion
  • Settlement
  • Studies
  • Survey
  • Legal fees: related to zoning and permitting.
  • Title fees
  • Underwriter fees
  • Lender title insurance
  • Escrow fee
  • Recording fee
  • Flood certificate
  • Interim interest, fees and points
  • Origination fees for Interim loan