SBA 504 Eligibility Guidelines

This SBA Loan video outlines the SBA 504 loan eligibility requirements. For easy reference, see the full transcript below the video.

Now that we’ve discussed the main benefits of the program, let’s talk about how it works. Who’s eligible? To be eligible for the 504 loan program, you must meet some basic small business loan criteria of SBA 504 requirements. First, you must be organized as a “for-profit” business. Not-for-profit organizations are not eligible for SBA 504 loans. Secondly, your business must fall under the SBA size standards. The standards vary somewhat by industry but generally a business qualifies if it has a tangible net worth of not more than $15 million, and an average net income of $5 million or less, after federal income taxes for the preceding two years prior to a SBA 504 loan application. In addition to being organized “for-profit” and meeting the size standards, there is a job creation requirement as part of the SBA 504 loan requirements. Generally, a business must create or retain one job for every $65,000 guaranteed by the SBA. Small manufacturers must create or retain a ratio of one job for every $100,000. As an alternative to job creation or retention, your business may qualify if it meets a community development or public policy goal as long as the CDC maintains its portfolio job average requirements. Moreover, there are some types of businesses that are automatically disqualified for SBA assistance; for example, real estate investment firms, casinos, and lending organizations to name a few. You can find a complete list of ineligible business types on Small Business Administration web-site (SBA.gov). As a final note on SBA loan eligibility - start-ups are not excluded from the SBA 504 financing loan program but will generally require a larger down-payment contribution.