a. Land: The project may include land, no matter how long it has been held. 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 SBA establishing a different value. The appraisal should include the sales history of the property during the last five years.

b. Land Improvements: Land improvements integral to the project can be included as eligible project costs except those improvements that are to be paid through special tax assessments or user fees. Examples of eligible land improvements are grading, new streets including curbs and gutters, parking lots, utilities, and landscaping.

c. Building Construction: All construction costs incurred within nine months of loan approval can be considered part of the 504 project cost.

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, provided that the Borrower immediately occupies at least 60 percent of the rentable property with plans to occupy some of the additional space within three years and plans to occupy all of the remaining space not leased-out on a long term basis within 10 years.

d. Purchase of an existing Building and Building Improvements: The costs to acquire and improve an existing building are eligible provided that the purchase price is supported by an appraisal acceptable to SBA.

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 percent 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.