SBA 504 Loans for the Property Your Business Uses

SBA 504 financing is for eligible fixed asset projects used by an operating business, not a general investment property loan. The structure includes a third party lender and a Certified Development Company, or CDC. You must evaluate the bank loan and CDC financing separately because they can have different rates, payment terms, and conditions. CapitalAx acts as a broker and helps you prepare the property, business, and project information for lender and CDC review. We do not make SBA eligibility decisions or issue government approvals. Under 13 CFR 120.131, an existing building must be occupied and used by the operating business for at least 51% of its rentable property. New construction requires at least 60% initial occupancy and use, with a plan to occupy some remaining space within 3 years and all remaining space that is not permanently leased within 10 years. The regulation permits permanent leasing of up to 20% of a new building. Under 13 CFR 120.910, your required contribution is at least 10% of project cost excluding administrative costs. It rises to at least 15% if the business has operated for 2 years or less, or if the project involves a limited or single purpose building. Both conditions require at least 20%. The familiar 50% bank, 40% CDC, and 10% borrower structure describes a standard project, not every transaction. SBA 504 proceeds cannot fund working capital or inventory, and the program does not finance speculation or investment in rental real estate. Your project must meet the applicable eligibility and repayment requirements. Rates, fees, loan proceeds, and the final structure require a lender and CDC assessment.