All loan applications are considered on a case-by-case basis. Final eligibility and credit worthiness is determined upon completion of a review of the entire loan application by SBA.
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While the SBA 504 loan offers numerous advantages for small business owners, it’s essential to understand the eligibility requirements before proceeding with an application. To qualify for an SBA 504 loan, businesses must meet specific criteria established by the Small Business Administration.
First, the business must be based and operate within the United States or its territories. Additionally, the company must be classified as a “small business,” as defined by the SBA. This classification typically means that the business must have a tangible net worth of no more than $15 million and an average net income of no more than $5 million after taxes for the preceding two years.
Another key aspect of eligibility for the SBA 504 loan is that the loan must be used for qualified business expenses. These expenses include purchasing real estate, machinery, and equipment and renovating or constructing facilities. The primary use of SBA 504 loans is for real estate. Note that for real estate development projects to qualify, the building(s) must be at least 51% owner occupied, meaning that buildings like apartment complexes do not qualify.
Business owners must typically contribute at least 10% of the project costs as a down payment. This requirement ensures that the business has a stake in the project’s success and is willing to invest capital in its growth and expansion goals. However, in the cases of start-ups or special-purpose buildings, the required down payment may increase to up to 15% or 20%.
In some cases, SBA 504 loans can also be used to refinance existing debt. Businesses seeking refinancing loans must meet the following criteria:
Another key requirement for SBA 504 loans is that the business owner must demonstrate the ability to repay the loan by providing financial statements and other relevant documents to show that the company can support the required monthly payments. This aspect is essential, as the SBA wants to ensure that loan recipients can successfully manage their debts and grow their businesses.
Before applying for an SBA 504 business loan, consider some crucial factors such as:
If you seek an economic development partner to grow your business, look to Alloy Commercial Capital. Our team has extensive experience in SBA lending and have helped finance over $1 billion in projects. As the largest SBA 504 lender in Ohio and Kentucky, we value our role as a certified development company, and when you work with us, you ll benefit from our passionate commitment to your ideas, your business, and your vision. Let us help you start the SBA 504 Loan process today, and contact us to learn more.
SBA 504 loans offer numerous advantages for small businesses, including competitive fixed interest rates, longer repayment terms (up to 25 years), and lower down payments than conventional bank loans.
Yes, existing businesses can benefit from SBA 504 loans if they meet the eligibility criteria. These loans can help businesses invest in new equipment, machinery, and real estate to expand their operations, improve productivity, and create new jobs.