504 Loan Eligibility Requirements

A business must meet the following criteria in order to be considered eligible for SBA 504 financing:

The business seeking financing must be organized for profit, and located within the United States.

Size – The businesses net worth must be less than $15 million and/or a net income (after taxes) of less than $5MM for the last two years.

Occupancy – Business purchasing existing commercial real estate must intend to occupy at least 51% of the building. Businesses financing the construction of a new building will need to occupy at least 60% of that building upon completion of construction, with intent to occupy more space within three years and reach 80% occupancy within ten years.

Guarantors – Individuals owning 20% or more of the business must act as personal guarantors. These owners may be required to inject additional funds in to the project if their personal liquidity, after contributing the required equity injection, exceeds the total financing request.

The SBA uses the following Liquidity Test to determine if additional funds are required:

• If the total project requires $250,000 or less in financing, each 20% owner in the business must inject any personal liquid assets that are in excess of two times the total financing or $100,000, whichever is greater.
  
  
• If the total project requires between $250,001 and $500,000 in financing, each 20% owner of the business must inject any personal liquid assets that are in excess of one and a half times the total financing or $500,000, whichever is greater.
  
  
• If the total project requires $500,000 or more in financing, each 20% owner in the business must inject any personal liquid assets that are in excess of one times the total financing or $750,000, whichever is greater.