SBA 504 Eligible Uses

The SBA 504 loan program can be used for "sound business purposes" as follows:

Commercial Real Estate purchases – SBA 504 proceeds can be used by a small business owner to purchase an existing piece of commercial real estate for primarily owner occupied use by the business.

Construction of Commercial Real Estate – SBA 504 proceeds may be used by a small business owner to construct a commercial building for primarily owner occupied use by the business. (A contingency reserve for construction cost overruns, not to exceed 10% of construction costs, may be included in the calculation of the total project costs.)

Expansion or Renovation of Commercial Real Estate – SBA 504 proceeds may be used by a small business owner to expand or renovate an existing commercial property. However, these funds cannot be used towards the expansion or renovation of space intended to be leased out as tenant space.

Land Purchases – SBA 504 proceeds can be used for land purchases where the value of the land is determined at cost, if acquired within the last two years, or at the appraised fair market value, if owned for more than two years.

Site Improvements – A maximum of 5% of the SBA 504 proceeds can be used for "community" improvements such as grading, paving, landscaping, curb and gutter improvements etc…

Equipment – SBA 504 proceeds can be used to purchase and install capital equipment and machinery for use by the business, where these assets have a useful life of at least ten years and are at a fixed location. Equipment purchases typically fall under the ten-year bond pool, receiving a ten-year interest rate. (Furniture, fixtures and equipment with a useful life of less than ten years can be included in mixed use projects where these items are “essential to, and a minor part of” the total SBA 504 financing for the project.)

Professional Fees – Fees directly attributable and essential to the project can be included in the SBA 504 financing. These include: title insurance fees, architect fees, engineering fees, any required environmental reports, project appraisals, municipal charges, title surveys, and related legal and accounting fees.

Interim Financing Costs – SBA 504 proceeds can be used to repay interim financing costs such as points charged, or interest paid to a lender during the interim or construction phase of a project. (Any expenses incurred toward the total cost of the projects, other than a land purchase, must be made within nine months of the date that a completed loan package is received for consideration.)