The project may include land, no matter how long it has been held. The value of the land will be at cost if acquired within two years of application. If the land was acquired prior to that time, the value also will be at cost unless the small business submits a professional appraisal acceptable to SBA establishing a different value. The appraisal should include three value comparisons of the property. The Bank should order the appraisal and the appraiser must be a third party conducting the appraisal.

Land improvements integral to the project can be included as eligible project costs except those improvements that are to be paid through special tax assessments or user fees. Examples of eligible land improvements are grading, new streets including curbs and gutters, parking lots, utilities, and landscaping.

All construction costs can be considered part of the 504 project cost. If the SBA business loan involves the construction of a new building, a borrower may lease up to 20% of the square footage of the rentable property (total square footage of all buildings or facilities used for business operations) on a long term basis, provided that the borrower immediately occupies at least 60 percent 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.

The costs to acquire and improve an existing building are eligible provided that the purchase price is supported by an appraisal acceptable to SBA. For a project that is partially leased out, costs for improvements that are an integral part of the structure of the building are eligible project costs. Examples of these costs would be facade expenditures, heating, electrical, plumbing and roofing costs. However, costs in connection with finishing the interior space to be leased out are not eligible. The borrower must occupy at least 51 percent of the rentable property. The balance of the rentable property may be leased out, on a long term basis, to a third party, if the loan proceeds were not used to remodel or convert the space to be leased out.

All costs associated with the purchase, transportation, dismantling, or installation of machinery and equipment can be considered part of the project cost. (If the project is only for machinery and equipment, the machinery and equipment has to have a useful life of at least 10 years). The costs of dismantling, moving, and installation of equipment may be included if these costs are part of a more comprehensive 504 project. An example would be heavy or highly calibrated equipment (such as a large printing press) which often requires specialty moving services.

Furniture and fixtures can be included in the project as eligible project costs 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.

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