Unlocking Growth: Leveraging Multiple 504 Loans for Business Expansion

You’ve already utilized an SBA 504 loan to establish a successful home base for your small business. But as your business continues to grow, the question arises: can you secure another 504 loan to open another location? The answer is a resounding yes!

The SBA 504 loan program offers the flexibility for multiple loans over time, empowering entrepreneurs to fuel their expansion. Here’s everything you need to know.

How to Secure More Than One 504 Loan

Most qualified business owners can borrow up to $5 million in SBA 504 financing. Manufacturers and projects that incorporate energy efficiencies have a greater borrowing capacity.

This means you can take out several 504 loans if you do not exceed this SBA maximum.

For example, Let’s say you secured your first SBA 504 loan to buy a building for $2 million.

In this case, the bank granted you a loan of $1 million (with their own rate and terms). The SBA provided $800,000, fully amortized at a fixed, below-market rate, and you contributed a down payment of 10% ($200,000).

The 504 loan structure would look like this:

Bank 1st Loan: $1,000,000
SBA/CDC 2nd Loan: $800,000
Owner Down Payment: $200,000
Total Project Cost: $2,000,000

Using the scenario above, you can still receive up to $4.2 million in 504 loans from the SBA.

SBA 504 Green Energy Program & Manufacturing Related Businesses

There are two ways small business owners may exceed the SBA lending limit of $5 million:

  • SBA’s Green Energy Initiative
  • Manufacturing-related businesses

Manufacturers and/or projects that incorporate energy efficiency measures have a greater borrowing capacity.

For manufacturers and for ‘green’ projects, the SBA 504 portion of the financing package increases to $5.5 million per project. There is no limit on the first mortgage amount, and therefore no limit on the total project cost.  In many cases, projects above $25 million can still qualify with only a 10% down payment.

If you are a manufacturer (defined as a business with its primary NAICS Code in Sectors 31, 32, and 33), or participate in the SBA 504 Green Energy Program there is no limit to the number of SBA 504 loans you can take out.

Hart Food Products

Bill and Leila Hall of Hart Food Products.

Bill and Leila Hall, co-founders of Hart Food Products, took full advantage of the 504 program, using it to finance property acquisitions and equipment purchases.

In 2009, the Hall’s secured their first SBA 504 loan to purchase a property in Paramount, CA and later secured a subsequent 504 loan for new equipment.

“Our production was maxed out, that’s how well we were doing,” explains Bill Hall. “We couldn’t grow anymore because our machinery was limited. TMC helped us buy new equipment, and that tripled our output.”

Now, Hart Food Products is sustaining its highest daily output ever.

“If you’re not taking advantage of the 504 Program, you’re missing a phenomenal opportunity. We are already looking at securing a 4th SBA 504 loan to expand to another location. The interest rates are better, the down payment is lower, and it is a better experience through and through.”

ACT Environmental Services

ACT Environmental Walt Singer 8 SBA 504 loans
Walt Singer. owner of ACT.

Act Environmental Services is another example of what can be accomplished with multiple 504 loans. Business owner, Walt Singer, received his first 504 loan in 2005 and used it to buy the company headquarters in Sunnyvale, CA. At that time, the company was dedicated to transporting hazardous waste.

Since then, the company has continued to flourish. They have taken out nine more 504 loans, and the company is now an industry leader. They have expanded their services to include a full range of waste management, recycling, disposal, treatment, health, safety, and compliance needs. They have grown to 250 employees and 110 trucks, and now have 12 locations servicing the western and southwestern regions of the U.S. and Mexico.

Singer attributes a major part of his success to his SBA loans.

“Our business requires a large investment in infrastructure that just wouldn’t be feasible if we were leasing,” Singer said. “We’re in a high-growth business with a great demand for cash. If we had to come up with a much higher down payment, we’d have that much less to put into our business. Without the SBA 504 loan program, we’d be 30% less successful.”

504 Loans with TMC Financing

The ability to take out multiple 504 loans can amplify business growth. A CDC like TMC Financing can help guide you throughout the entire loan process.

Founded in 1981, TMC Financing is the leading provider of SBA 504 commercial real estate loans in the nation, funding projects worth over $14 billion across Arizona, California, Nevada, and Oregon. Over 7,000 businesses have benefited from this financing, resulting in the creation of an estimated 60,000 jobs. Contact us today to learn more.

Kurt Chambliss is Executive Vice President of Sales and Marketing for TMC Financing, focused on serving small business clients throughout San Francisco’s East Bay. With over 16 years of SBA 504 lending industry experience, Kurt seamlessly guides clients through the loan process helping to secure SBA financing for small businesses and introducing them to the best first mortgage lenders that meet the clients’ needs, supporting them through the entire process. Kurt acts as an advocate for small business owners, and is passionate about helping small businesses grow and succeed.
Kurt Chambliss