SBA 504 Loan Requirements

The number one rule when trying to figure out if you qualify for a Small Business Administration (SBA) 504 Loan is to never rule yourself out if you are unsure! If you dive into all the details on the SBA 504 Loan Requirements, you may not think you qualify but the truth is, MOST for-profit businesses qualify for the 504 loan.

Certified Development Companies (CDCs), such as TMC Financing, administer SBA 504 Loans on behalf of the SBA. They are your best resource to help determine if you are eligible. TMC representatives are always happy to chat with California or Nevada businesses to see if they qualify. There are of course some requirements for the 504 Loan which no borrower needs to memorize – but could be useful to familiarize yourself with.

SBA 504 Loan Requirements

For-Profit Business

The most basic 504 loan requirement is that you must have a U.S. based, for-profit business. Non-profit businesses as well as the following industries are deemed ineligible:

  • Lending businesses
  • Political/lobbying businesses
  • Life insurance companies
  • Businesses with primary revenue from gambling
  • Most passive income businesses


The SBA 504 Loan is intended to help small businesses purchase property or fixed assets for their business. To keep the integrity of the program, there are occupancy requirements that must be met.

  • The applicant’s business must occupy at least 51% of the property being purchased
  • For new construction, the applications business must occupy a minimum of 60% of the property

The occupancy requirements allow borrowers to purchase more space than what they need so they can rent out a portion of their space and increase their cash flow.

Size Standard

Don’t let the word ‘small’ deter you from the program. According to the SBA, 99.7% of all U.S. firms are considered ‘small’ businesses. As a general rule:

  • The tangible net worth of the business cannot exceed $15 million
  • After-tax profit for the last two years cannot exceed $5 million

However, even if you exceed what is listed above, alternative size standards based on number of employees can be met. This exception is different for all industries, so your CDC is your best resource to see if you can qualify with alternative size standards.

Community Development

The SBA wants to ensure that the loan will be used to better develop our economies and therefore would like to see what type of public policy goals the company would be helping achieve. Some examples include expanding exports, expanding a minority or woman-owned business, aiding in rural development, diversifying the economy, bringing new income to the economy, etc. There are many other public policy goals that could be applied to your business. Your local CDC can help determine what best suits your business.

Job Creation

The SBA would also like to see that the loan is providing or retaining jobs. However, some CDCs, such as TMC Financing, have surpassed the minimum requirement for job creation as a company and therefore this requirement isn’t applied to each individual business.

The SBA 504 Loan requirements may seem confusing, which is why we encourage business owners leave the eligibility determinations up to the 504 Experts. Never assume that your business doesn’t qualify! TMC Financing can even prequalify you for free within 48 hours to determine your purchasing power.

Why the SBA 504 Loan?

Now that you know more about the requirements for the SBA 504 loan, you may be asking how the loan could benefit your business. The SBA 504 Loan Program was created to make property ownership possible for business owners. It is a powerful tool that can help a business gain control of their occupancy costs and build equity. It features a below market, long term FIXED rate and only requires a 10 percent down payment. The funds can be used to:

  • Purchase land
  • Purchase existing buildings
  • Purchase long-term machinery and equipment
  • Purchase improvements (including grading, street improvements, utilities, parking lots and landscaping)
  • Build new facilities or modernize, renovate or convert existing facilities
  • Refinance/consolidate existing conventional loans

You can find out more about how to obtain a 504 loan from one of TMC Financing’s 504 loan experts. We work to get you the best financing conditions possible and will be your advocates for the full life of the loan.

TMC Financing is one of the country’s leading CDCs and an SBA Premier Certified Lender. TMC’s experts can answer all of your questions about the 504 loan and guide you through the loan process. Talk to one of our 504 loan experts today.