FAQ

What is the 504 Loan Program?

The 504 Loan Program is a U.S. Small Business Administration (SBA) funded program that provides financing to small and mid-sized businesses with long-term, fixed-rate financing to acquire major fixed assets for expansion or modernization, for example purchase equipment, commercial real estate, etc.

What can a 504 loan be used for?

Business owners can use 504 loans for fixed asset projects, such as:

The purchase of land, including existing buildings
The purchase of improvements, including grading, street improvements, utilities, parking lots and landscaping
The construction of new facilities or modernizing, renovating or converting existing facilities
The purchase of heavy machinery and equipment and commercial vessels.
Soft costs such as title searches, attorney’s fees, appraisals, etc.

What advantages does the loan offer?

For businesses, the low down payments and fixed, long-term interest rate, the 504 loan helps the businesses retain working capital. The long term repayment schedule removes the uncertainty associated with refinancing and balloon payments, enabling long-term planning and business expansion. For lenders, the loan offers lower risk through shared financing, a low loan-to-value ratio and the ability to earn CRA credits.

What types of businesses are eligible?

Businesses must be for-profit enterprises with a tangible net worth not to exceed $15 million and an average net profit after taxes no more than $5 million for the preceding two years. The loans are available to individual business owners or multiple owners partnering on a project.
The 504 loan program serves a wide range of businesses, from service providers to manufacturers such as auto repair shops, Internet retailers/wholesalers, law offices, child care centers, hotels, motels, manufacturers (food, apparel, equipment, machine shops, furniture, etc), veterinary clinics and warehouses.

What’s the maximum amount of a 504 loan?

The maximum amount of a 504 loan is $5.5 million. The loan amount depends on eligibility and the job creation, community development and economic development goals met by the project.

How does financing work?

San Fernando Valley CDC partners with lenders to provide up to 90% financing for a project. The partner lender provides 50% of the project cost and San Fernando Valley CDC provides 40%. The borrower contributes at least 10% into the project.

What kind of job creation, community development and public policy goals must be met to obtain a 504 loan?

To be eligible for a 504 loan, applicant businesses must meet at least one of many job creation, community development or public policy goals through their expansion projects. The goal(s) met determine the maximum amount of the 504 loan.

Job creation goals

Jobs are created within two years as a result of the project – one job created per $65,000 to $100,000 of loan amount
Jobs are retained—if it can be shown that jobs would be lost to the community if the project was not completed

Community development goals

Project will help to improve, diversify or stabilize the economy of the locality
Project will stimulate business development in the community
Project will bring new income into the community
Applicant business is a manufacturing firm
Applicant business is in a labor surplus area

Public policy goals

A minority individual owns and controls 51% or more of the applicant business
A woman owns and controls 51% or more of the applicant business
A veteran owns and controls 51% or more of the applicant business
Project is located in a business district of a community with a written revitalization or development plan
Project will expand exports
Project is located in a rural area
Project is necessitated by federal budget cutbacks
Project is required by a federally mandated standard or policy
Project will increase productivity and competitiveness
Project will reduce energy consumption by at least 10%