Answers ~6 min read Updated
SBA 504 Loan Requirements: Who Qualifies and What It Takes
SBA 504 loans are for buying or building real estate and long-life equipment. You need a for-profit business that occupies at least 51% of the building, 10% to 20% down, and cash flow that covers the payments.
An SBA 504 loan requires a for-profit business that will occupy the property it buys, a 10% to 20% down payment, and cash flow that covers the payments. The money must go to fixed assets: buying, building, or improving real estate, or buying long-life machinery and equipment. It can't be used for working capital or inventory.
In return, you get a long fixed rate on a big part of the project and a much smaller down payment than a regular commercial real estate loan.
The eligibility checklist
- For-profit business operating in the U.S.
- 100% owned by U.S. citizens or U.S. nationals. This rule took effect March 1, 2026, for both 504 and 7(a) loans.
- Within SBA size limits. You qualify if you meet the size standard for your industry, or if your tangible net worth is $20 million or less and your average net income after taxes for the last two years is $6.5 million or less.
- Owner-occupied property. The business must occupy at least 51% of an existing building, or 60% of a new building it constructs. You can lease out the rest.
- Fixed-asset use. Real estate, construction, renovations, and long-life equipment.
- A community benefit. Most projects meet this by creating or keeping jobs. A few meet it through other public policy goals, like energy efficiency or rural development. Your CDC handles the details.
The down payment
| Your situation | Down payment |
|---|---|
| Established business, general-purpose building | 10% |
| Business under 2 years old | 15% |
| Special-purpose building (hotel, gas station, car wash, bowling alley) | 15% |
| Both: new business and special-purpose building | 20% |
Compare that to a typical bank loan on owner-occupied real estate, which often needs 15% to 25% down, and more for special-purpose buildings.
The credit requirements
- Cash flow that covers all loan payments. Most lenders look for a DSCR of 1.25 or better.
- Good credit for each owner. There's no SBA minimum score; each lender sets its own.
- Personal guarantees from every owner of 20% or more.
- Industry experience, especially for a newer business or a special-purpose building.
What to expect on fees and closing
A 504 has fees on the CDC portion, usually financed into that piece. Real estate deals also need an appraisal, an environmental report, and title work. Plan on 60 to 90 days or more from a complete application to closing. See how long an SBA loan takes.
Is a 504 the right fit?
If you're buying a building or big equipment and want to keep cash in the business, it usually is. If you also need working capital or want to buy a business, look at the 7(a). Read SBA 7(a) vs. 504 to compare them side by side.
Common questions
What are the requirements for an SBA 504 loan?
A for-profit U.S. business, 100% owned by U.S. citizens or nationals, within SBA size limits, using the money for fixed assets like real estate or long-life equipment. The business must occupy at least 51% of an existing building or 60% of a new one, put 10% to 20% down, and show cash flow that covers the payments.
What is the down payment on an SBA 504 loan?
Usually 10% of the project. It rises to 15% if the business is less than two years old or the building is special-purpose, like a hotel or gas station, and to 20% when both are true.
Can I use an SBA 504 loan for an investment property?
No. The business has to occupy the property: at least 51% of an existing building or 60% of a new one. A rental property you don't operate from is not eligible.
What is the size limit for an SBA 504 loan?
A business qualifies if it meets the SBA size standard for its industry, or if its tangible net worth is $20 million or less and its average net income after taxes for the past two years is $6.5 million or less.