New SBA Loan Limits to Look Out For in 2018

The Small Business Administration (SBA) 504 loan program has grown and evolved tremendously since it was introduced in 1980. Often changes to the program are introduced at the beginning of the year, and 2018 is no exception. There have been a large number of changes this year, and we will review the most important of them below. In addition, there is an entirely new loan offering coming out in the second quarter of this year: the 25-year 504 loan.

The SBA’s New Year’s Resolutions: Program Updates

Aggregate Financing for Green Energy Projects: The Green Energy Program encourages energy conservation and the use of renewable energy sources by increasing the SBA portion of the loan from $5 million to $5.5 million and allowing the borrower to fund multiple projects. This is still the case, but the new limit on total funding from the SBA is $16.5 million. There is still no limit on total project cost.

The program remains a wonderful opportunity for businesses that can qualify in one of three ways:

  • Buy or construct a building that consumes 10% less energy than your current location
  • Make upgrades to the building you own to consume 10% less energy, or buy the building you now lease and do so
  • Buy or construct a building that produces 10% of the energy it consumes or that produces fuel to reduce fossil fuel consumption, or buy equipment to do so at your current location

Renewable energy sources include solar, wind, geothermal, biomass and hydropower.

Single-Purpose Properties: The SBA has reduced the number of property types that it categorizes as “single-purpose.” These are facilities that cannot easily be repurposed and require a 15% down payment to receive a 504 loan.

Conditions remain the same for business owners seeking their first 504 loan to buy or build a single-purpose property. Subsequent loans to the same borrower for single-purpose properties will now require 20% down payments, however. The down payment for 504 loans outside the single-purpose category remains 10%.

The Franchise Directory: The SBA has created a comprehensive Franchise Directory that will speed up the loan approval process and make it more consistent. Once a franchise is found to be eligible to participate in the 504 loan program and it is included in the directory, no other review of it will be needed. Franchises not yet listed can send their documents to the SBA for a ruling and inclusion in the directory, or a Certified Development Company (CDC) can do so on behalf of a 504 loan applicant. The SBA confirms that a franchisor meets Federal Trade Commission criteria and that franchisors do not have excessive control over small business franchisees.

Refinancing: Small adjustments have been made to the debt that is eligible for refinancing with the 504 loan, and the size of the cash-out for business expenses has been reduced from 25% to 20%.

The New 25-Year SBA 504 Loan

A new loan option will be introduced this year. That is the 25-year 504 loan, which joins those with 10- and 20-year terms. The new loan option will be popular with borrowers seeking low monthly payments, who will benefit from it by having more cash on hand.

The 25-year 504 loan will have the same conditions as the 10- and 20- year loans that are currently offered. Preparations for the new loan began last year. There are a lot of parties that make the 504 loan program work, and the details of the new loan option have to be coordinated among all of them. The 25-year 504 loan is expected to be available to borrowers in the second quarter of the year.

A 504 loan can be used to:

  • purchase land or buildings
  • construct buildings
  • purchase equipment with a service life of ten years or more
  • improve, upgrade or renovate buildings
  • refinance conventional debt

The 504 loan is administered by a CDC such as TMC Financing, and loans are granted in conjunction with a conventional lender that provides 50% or more of the project total. Your CDC facilitates the SBA loan for up to 40%, or $5 million ($5.5 million for manufacturing projects or if the project participates in the Green Energy Program), at a fixed, below-market rate. The borrower provides 10% of the project cost as a down payment.

  • 50% Conventional lender
  • 40% CDC
  • 10% Borrower

You can find out more about the SBA 504 loan from one of TMC Financing’s 504 loan experts. TMC is an SBA Premier Certified Lender and a high-volume loan provider. With over 35 years of experience, TMC can help you find the financing that is best for you and guide you through the 504 loan process. Contact TMC Financing today.


Barbara Morrison, a local small business advocate and civic leader, founded her first company TMC Financing in 1981. TMC is a Certified Development Company that provides commercial real estate financing to small business owners via the SBA 504 Loan Program. TMC consistently ranks among the top certified development companies nationwide, and has funded projects worth more than $9 billion across California and Nevada. Nearly 5,000 small businesses have benefitted from this financing, resulting in the creation of an estimated 50,000 jobs. TMC is also the No.1 SBA 504 hotel lender in the United States. Barbara is also the founder of Working Solutions, a Bay Area microlender whose mission is to provide micro entrepreneurs, particularly low-income individuals, women and minorities, with the access to capital and resources they need to start a successful business.
Barbara Morrison