Who Can Get an SBA 504 Loan?

Many of the 28.8 million small businesses in the United States have benefitted from the support from the Small Business Administration (SBA). The SBA provides small business owners with training, contracting, advocacy and access to capital. The SBA 504 loan program is an important part of the SBA’s financing activities. It is designed to help small businesses grow by providing accessible financing for fixed-asset acquisitions. With a 504 loan, you can purchase commercial real estate (buildings or land), construct new buildings, purchase large equipment or upgrade existing buildings.

There is much discussion in the small business community about who can get an SBA loan. You can get some helpful advice from these articles, but keep in mind that the best source of information is your Certified Development Company (CDC), the nonprofit organization that administers the 504 loan program.

For example, in a Forbes article, writer Jared Hecht says that the application process is very long and gives you an extensive list of required documents. But if you were to work with a CDC like TMC Financing, who is a premier lender in the state of California, you could prequalify for a 504 loan in 24 hours, typically using three simple documents:

  • Three years of personal and business tax returns
  • A personal financial statement
  • Interim financials

So who is able to qualify for an SBA 504 loan? The short answer is, almost everyone. The main eligibility requirements for the 504 loan are:

  • The business must be for-profit
  • The business’s tangible net worth cannot exceed $15 million
  • The business’s after-tax profit for the last two years cannot exceed $5 million

There are a few general limitations on the types of businesses that can receive a 504 loan, but they are unsurprising. Your business can’t be engaged in political lobbying, for example, or present live performances of a prurient nature. Other than that, you are most likely a good candidate to apply for a 504 loan and should reach out to your local CDC!

TMC Financing Client Case Studies

TMC has helped a number of specialized small businesses finance their expansion over the years. Let’s look at a few of their more recent case studies, which have been related to the music industry.

Tim’s Music in Carmichael, CA rents and repairs musical instruments, sells exercise books and sheet music (from a database of 50,000 titles) and offers lessons onsite. It has been in business since 1977. Scott and Melissa Mandeville bought the store from Tim Lawrence in 2005, and now 14 music teachers work at Tim’s Music. Recently, they received financing from TMC to move to new facilities on Fair Oaks Blvd.

The beautiful new showroom is warm and inviting…” they said. “Tim’s Music now has 14 lesson studios and offers lessons on all band instruments, violin family, and guitar. We have added a beautiful new recital hall, and the repair shop also got a boost in size during the move. We upgraded much of the tooling and have incorporated loads of new technology in the repair shop!”

The Piano Store in Rocklin, CA also recently received financing to move to a larger facility with a showroom and its own recording studio and lesson room. Owner Ben Nieves and his wife opened The Piano Store in 2012. They sell a wide range of new and used, traditional and digital pianos. They also sell pianos on consignment, and they even place unwanted pianos with charitable organizations that can use them. The Piano Store is the center of a broad network of piano professionals—teachers, tuners, technicians, restorers and movers. Some of the beautifully restored pianos they sell are over a century old!

Music is not the only form of artistic expression TMC has helped finance. Seventh Son Tattoo in San Francisco’s SoMa district is a leading local tattoo studio. Nine resident artists and frequent guest artists create traditional Japanese, black & gray, floral, biomechanical, ornamental and illustrative tattoos. The studio also has a team of registered nurses that carry out laser tattoo alteration and removal under the guidance of a plastic surgeon.

How to Get an SBA 504 Loan

As mentioned before, the first step toward securing a 504 loan is prequalification, which will speed up your application. It will confirm your eligibility and give you an idea of how much financing to expect, the size of the down payment that may be required and what your monthly payments may be. You don’t have to have a property in mind at the time of prequalification, and prequalifying places you under no obligation to go forward with the loan.

The 504 loan is administered by a CDC such as TMC Financing, and loans are granted in conjunction with a conventional lender (bank or credit union) that provides 50% of the total project cost. Your CDC facilitates the SBA loan for up to 40%, or $5 million ($5.5 million for manufacturing projects or if your project participates in the SBA’s Green Energy Program), at a fixed, below-market rate.  You provide 10-15% of the project cost as a down payment.

The 504 has a 10-, 20- or 25-year term, and it is fully amortized (so there are no balloon payments). Because the conventional lenders are in first lien position in a 504 loan, their risk is limited, therefore they lenders find it advantageous to work in a partnership with the SBA.

You can find out more about receiving a 504 loan from one of TMC Financing’s 504 loan experts. TMC is an SBA Premier Certified Lender, and has funded projects worth more than $9 billion across California and Nevada, resulting in the creation of an estimated 60,000 jobs. 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

Barbara Morrison

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