Beginner’s Guide to SBA 504 Loans for Small Business Owners

The Small Business Administration offers loans to entrepreneurs launching their own companies. SBA 504 loans are one option, and many entrepreneurs have benefitted greatly from these. The 504 program is designed to help people in communities in need of economic development have access to the necessary funds to build a business. These loans most often go to minorities, women and veterans. It is supposed to be a long-term financing tool that a business owner can acquire with the help of a Certified Development Company.


A CDC is a non-profit organization that aims to help communities with economic development. The CDC works directly with the SBA. In total, there are approximately 270 CDCs located around the country. Each individual location services a specific location, so you should be able to find the one nearest you to request a loan.


Before applying, you should be aware of what the money in the loan can go toward. You can use it to purchase an existing building or to buy land to improve over time. You can renovate, modernize or construct a completely new facility. You can even buy machinery that is essential for the development of the company. SBA 504 loans can also help with refinancing debt so that you can expand your business.


You also need to determine if your business can even qualify for these loans. The Small Business Administration classifies a business as small if it has a tangible net worth of less than $15 million. After taxes, the net income must be less than $5 million. Additionally, the SBA will look at all of the activities of the business. Generally, the only types of companies that will not qualify include lenders, non-profit organizations and companies associated with speculative activities.


The process is relatively simple. You will need to contact your local SBA office to see if your business qualifies. The review process should go quickly, and at that point, you can contact a local CDC. A representative from the CDC will tell you all the documents you will need to apply for the loan. You will have a face-to-face meeting where you will need to present these documents and make your case for why you should receive these funds.


SBA 504 loans can be an immense help, especially if your small business does not qualify for loans from a regular bank. Most small business owners will find that they can get a 504 loan, so do not overlook it.


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