504 Loan Eligibility

The 504 loan serves numerous expanding small to mid-sized businesses and supports economic development in communities nationwide.

Eligible Borrowers:

• For-profit businesses.
• Tangible net worth no greater than $15 million combined for the applicant and any affiliated businesses.
• Net profit after taxes no greater than $5 million during previous two years.
• Must meet at least one goal related to job creation, public policy, or community development through their expansion project.

Businesses served include, but are not limited to:

• Dairy Farms
• Daycares
• Funeral Homes
• Hotels & Motels
• Manufacturers
• Professional Service Buildings
• Restaurants
• Retailers
• Wholesalers

The maximum loan amount is:

• Regular 504: $5 million
• Small Manufacturer or " Green Public Policy Goal*: $5.5 million

(The minimum 504 loan amount is $50,000.)

* Defined as NAICS Code beginning with 31, 32, or 33 with all production facilities in the U.S.

Wisconsin Business Development does not provide interim financing for the project.  Interim financing is provided by one of our commercial lending partners from across the state of Wisconsin.  WBD then provides a portion of the permanent, take-out financing when the project is completed and the loan is closed in accordance with the SBA loan authorization.

Eligible 504 loan uses:

• Land and building purchases
• Building construction, expansion, and remodeling
• Machinery and equipment purchases
• Professional fees and soft costs (i.e. appraisals, attorney fees, etc...)

504 projects can also 'mix and match' from the list above provided the average useful life of the assets exceeds the loan term.

Land and building purchases:  The value of the land will be at cost if acquired within two years of application.  If the land was acquired prior to that time, the value also will be at cost unless the small business submits an appraisal acceptable to the SBA establishing a different value.  The appraisal should include the sales history of the property during the last five years.  The costs to acquire an existing building are eligible provided that the purchase price is supported by an appraisal acceptable to the SBA.

Building construction, expansion, and remodeling:
All construction costs incurred within nine months of loan approval can be considered part of the 504 project cost.  The costs to improve an existing building are eligible provided that the purchase price is supported by an appraisal acceptable to the SBA.  If the project involves the construction of a new building, a Borrower may lease up to 20% of the square footage of the rentable property (total square footage of all buildings or facilities used for business operations) on a long-term basis.  The Borrower must immediately occupy at least 60% of the rentable property with plans to occupy some of the additional space within three years.

For a project that is partially leased out, costs for improvements that are an integral part of the structure of the building are eligible project costs.  Examples of these costs would be facade expenditures, heating, electrical, plumbing, and roofing costs.  However, costs in connection with finishing the interior space to be leased out are not eligible.  The Borrower must occupy at least 51% of the rentable property.  The balance of the rentable property may be leased out, on a long-term basis, to any third party, if the loan proceeds were not used to remodel or convert the space to be leased out.

Machinery and equipment purchases:
On either a stand alone basis or in concert with a real estate project, acquisition of equipment is eligible for 504 financing.  Stand-alone equipment projects typically qualify for 10-year debenture financing.  If the useful life of the asset meets or exceeds 20 years, they can be financed within a 20-year debenture package.

Professional fees and soft costs:
Project-related soft costs (i.e. appraisal, environmental report, interim interest paid on the construction financing, moving costs for calibrated equipment) and professional fees (i.e. architect) may be eligible for inclusion in a 504 project.