SBA 504 Loan Program

The SBA 504 Loan program makes fixed asset purchases like commercial real estate acquisition and large equipment affordable, allowing small businesses of all kinds to invest in themselves and their communities.

Program Benefits

Low down payment

fixed rates

Long-term financing

Fully amortized loans over 10, 20 or 25 years

Kind Words

FAQ Section

The SBA 504 Loan Program assists small business owners looking to expand their businesses through the purchase of commercial real estate or capital equipment. IBFS works in conjunction with lenders to provide up to 90% financing for commercial property purchases and construction.
IBFS provides up to 40% of the total project cost with a 10, 20 or 25-year loan, which has a fixed rate of interest for the life of the loan. The lender finances 50% of the project and the borrower puts down a minimum of 10% equity into the project.

Sample Project Image

* Startup properties require 15% equity, special purpose properties require 15% equity and properties that are both a startup and special purpose require 20% equity.

  • Acquisition of vacant land for construction of a building
  • Acquisition of land and building
  • Leasehold improvements
  • Renovation of, or addition to a building
  • Construction of a building
  • Acquisition of a commercial fishing vessel or party boat
  • Acquisition of heavy duty machinery or equipment (such as a printing press)
  • Associated soft costs: title searches and insurance, appraisals, environmental reports, architects, permits, surveys, installation of machinery, points on bridge loans, a small amount of furniture and fixtures, etc.
  • Otherwise not permitted, refinancing can be undertaken through the temporary 504 Debt Refinance Program. 
Unpermitted uses include: working capital, mortgage broker fees, points on permanent financing, moving expenses, legal fees, payroll, taxes, inventory, hazard or life insurance, etc.

The SBA 504 is a community lending program designed to improve the locality through helping small businesses make an impact on the community. Thus, eligibility requires that one of the following economic development goals be met:

Job Creation And Retention
One full-time equivalent job for every $65,000 borrowed from IBFS

Public Policy

  • Revitalize a business district of a community with a written revitalization or development plan
  • Expand exports
  • Aid rural development
  • Change necessitated by federal budget cutbacks
  • Change required by mandated standard (health, safety, or environmental laws)
  • Increase productivity and competitiveness (retooling or modernization)
  • Expand minority-owned business development, ownership must be 51% or more
  • Expand woman-owned business development, ownership must be 51% or more
  • Expand veteran-owned business development, ownership must be 51% or more

Community Development

  • Help to improve, diversify, or stabilize the economy of the locality
  • Stimulate other business development in the community
  • Bring new income into the community
  • Assist manufacturing firms
  • Assist businesses in a labor surplus area

IBFS may lend up to 40% of the project cost with a maximum of $5 million for all projects and can go as high as $5.5 million for SBA financing on eligible manufacturing businesses. Projects that incorporate energy saving technologies for sustainable design have also become eligible.

Such examples include:

  • The project has plant, equipment and process upgrades of renewable energy sources, such as the small-scale production of energy for individual buildings or communities’ consumption. These renewable sources could include solar, wind, or geothermal energies.
  • Small businesses wishing to purchase, construct, or retro-fit facilities that incorporate energy saving technologies that result in a 10% decrease in energy consumption.

The minimum SBA 504 loan must be at least $50,000. However, under good cause shown, SBA may permit a 504 loan as small as $25,000.

The interest rate on the SBA 504 loan is set when the SBA sells the bonds (debentures) to fund the loan. When determined, the rate is then fixed for the duration of the loan in a self-liquidating arrangement. Due to the 504 debentures being fully amortized securities, there are no balloon payments of any kind. However, because of the debenture funding, there is a premium for prepayment during the first half of the loan term. The terms of an SBA 504 loan through IBFS may only be 10, 20 or 25 years. For IBFS to do a 10-year loan, the lender must have at least a seven-year term or balloon of no less than seven years on the 50% first mortgage. Similarly, for IBFS to do a 20 or 25-year loan, the lender doing the 50% first mortgage must have at least a 10-year term or balloon of no less than 10 years. The rate on the 50% first mortgage can be adjusted at any time of the lender’s choosing. However, that lender may have a longer payout as some lend for a 10-20 year term and have a payout of 20-25 years.

Yes, the business owner must occupy at least 51% of an existing building. For new construction, the owners must agree to occupy 60% of the building with plans to occupy 80% within ten years.

IBFS takes a subordinate (second mortgage) position to secure its 40% portion of the financing and a security interest in all assets financed. A life insurance condition is generally not required unless there is no succession plan in management. Further assets of the business or principals are generally not required, unless, the company is a start-up, the credit is unusually risky, or the assets being financed are considered “single purpose” or do not appraise high enough.
Loan fees are 2.15% of that part of the financing provided by IBFS. Other fees associated with the loan consist of legal review ($650-$1,000), title insurance, and typical real estate closing costs. These fees can all be financed.
There are pre-payment penalties if the loan is paid off during the first half of the contract. The penalty is based on the interest rate and the amount borrowed; it declines every six months.
IBFS works closely with your lender to avoid duplication of effort and time. Once we receive a complete application, IBFS can usually have a loan internally approved within 10-15 days. Approval from the SBA usually takes an additional 5-10 business days. Depending upon the project, please expect no less than 60 days from start to finish.

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