Understanding the Particulars of the SBA 504 Loan Program

As a small business owner, you may be looking for financing to help keep your business afloat. Chances are, you have spent a considerable amount of time researching SBA refinancing, loans, business loans, and related topics. While there are approximately 30.2 million small businesses in the United States, many small business owners turn to SBA loans. Let us delve into some very important particulars regarding the SBA 504 loan program.

What Are SBA 504 Loans?

Small Business Association 504 loan program or the SBA 504 loan program offers long-term as well as fixed-rate financing for small business owners in the United States. Business owners can potentially receive a fixed rate of financing of up to 5 million for their fixed assets. Job creation and the promotion of business growth should be at the forefront. The SBA 504 loans are made available through CDCs or Certified Development Companies. These companies are businesses that are community-based partners that promote economic development in their communities and also regulate nonprofit entities.

How Can My Business Qualify for an SBA 504 Loan?

In order for your business to qualify for an SBA 504 loan, the SBA 504 loan program will view your business and the contribution it makes to your community as well as society. In addition to other factors, your business must: have a net worth that’s tangible of less than 15 million, operate as a company that operates as a for-profit business here in the United States or its possessions, and have a net income that is less than 5 million after federal taxes. The SBA 504 loan program will also take into consideration other factors when evaluating your company for an SBA loan.

Once I Receive The Loan, How Can I Utilize the Funds?

Once you receive your SBA 504 loan from the SBA 504 loan program, you may be able to utilize the funds to help with job creation as well as business growth. The funds you receive can be used to construct new facilities or buildings for your business, add on to existing land or construction, purchase equipment, tools, or supplies for your business, and more.

Are There Things That I am Prohibited from Using my 504 Loan For?

The SBA 504 loan program does have stipulations on how small businesses can use the funds. The first of them is the monies that companies receive from the SBA loans cannot be used for the consolidation, refinancing, or repaying of any debts. The SBA 504 loan program also prohibits companies from investing in rental real estate. There are other stipulations that the SBA has regarding the usage of the funds received.

What If I Want to Pay My SBA Loan Back Early?

Sometimes, paying items off early serves you as a business owner. However, many times, it does not. Whether you are looking to free up cash, or to put an end to the amount of money that you owe, paying your SBA loan off early may come with a penalty.

Oftentimes, SBA loan lenders are looking forward to those interest payments in order to make money off of you as a business owner. Although the SBA 504 loan program does cater to the small business owner with the big ideas, the SBA loan works like a conventional loan you may encounter a penalty for paying it back fast and early. Whether or not you should pay your SBA loan off early ultimately comes down to the arithmetic. As your North Dakota development group, we can sit with you and help you understand the particulars of your SBA loan.

Being a small business owner is no easy feat. That’s why we’re here. We can help you not only understand the details of the SBA 504 loan program, but we can also assist as you work on applying for the SBA 504 loan. We also provide information about SBA refinancing, various other small business loans, small business lending for North Dakota businesses, and more.

Connect with our Small Business Assistance Team today, and find out what resources are available for you to succeed as a small business owner with big dreams.


Matt Burthold, Commercial Lending Director | (701) 667-7601 | matt@lcdgroup.org
Ashley Hruby, Senior Lending Director | (701) 667-7607 | ashley@lcdgroup.org
Derrick Becker, Commercial Closing Officer | (701) 667-7622 | derrick@lcdgroup.org

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