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The SBA 504 Loan Program Explained

An SBA 504 loan can be a great financing option for small business owners looking to expand their business or build a new one.

[Updated: Jun 10, 2021 ] Jun 12, 2020 by Liz Brumer
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Loan SBA 504 SBA 7(a)
Eligible business size Net worth of $15 million or less.Average net profit after taxes for the past two years should be $5 million or less. Annual sales cannot exceed $750,000 or $33.5 million for retail, service, or agriculture industries.100 employees or fewer, or 1,000 employees or fewer for a wholesale or manufacturing business.
Loan term 10 years for an equipment loan.20 or 25 years for real estate.Prepayment penalty. 10 years for a business acquisition or equipment loan.Up to 25 years for real estate.5 to 7 years for working capital.Prepayment penalty.
Interest rate Fixed rate. Almost always variable.
Proceed use Purchase an existing building.Land acquisition and ground-up construction.Improve, repair, or expand existing building.Equipment purchase.Working capital.Leasehold improvements. Expand, acquire, or start a business.Purchase an existing building.New construction.Refinance existing business debt.Equipment or inventory purchase.Working capital.Leasehold improvements.
Eligibility or program requirements Must prove job retention or job creation out of proceeds.A personal guarantee for any owner with 20% or more stake in the business. A personal guarantee for any owner with 20% or more stake in the business.May require the borrower to pledge primary residence if there is more than 20% equity in their home.