Project Eligibility
There are certain costs eligible for financing under the SBA 504 loan program. They include the cost to:

Acquire land (by purchase or lease);
Improve a site (e.g., grading, streets, parking lots, landscaping),
including up to 5% for community improvements such as curbs and
sidewalks;
Purchase one or more existing buildings;
Convert, expand or renovate one or more existing buildings;
Construct one or more new buildings;
Acquire (by purchase or lease) and install fixed assets (for a SBA 504
loan, these assets must have a useful life of at least 10 years and be at
a fixed location, although short-term financing for equipment, furniture,
and furnishings may be permitted where essential to and a minor portion
of the project);

Pay for other expenses of the project including expenditures incurred by the borrower (with its own funds or from a loan); To acquire land used in the project prior to applying for the SBA 504 loan; Pay for other expense of a project paid within nine months prior to receipt by the SBA of a complete loan application (unless the time limit is extended or waived by the SBA for good cause); Pay for overruns not to exceed 10 percent of construction cost; Pay for professional fees directly attributable and essential to the project, such as title insurance, architecture, engineering, accounting, environmental studies and legal fees (other than legal fees associated with the closing); and Repay interim financing, including points, fees and interest.       Additionally, up to one third of your loan funds can be used to refinance   existing debt if that debt was originally related to fixed asset financing.

Structure of a SBA 504 Loan
A complete SBA 504 financing package consists of two financing sources, the SBA and a private sector lender. The SBA can loan up to 40% to any approved project. The business receiving the financial assistance is required to inject at least 10% of the total funds for any project. Certain types of projects may require additional injection of funds by the business. Third party lenders, usually a bank or savings and loan institution, must provide the remaining percentage of the financing.

Terms
SBA 504 loan terms are: 10 years for loans on machinery and equipment; and 20 years for loans on real estate, including buildings. Interest rates are "fixed" for the full term of the loan and as of February 2010, are as low as 5.55% for 20 year loans.

Collateral
Loans under the SBA 504 program must be secured to ensure repayment. Collateral may include: a mortgage on the land and building being financed; liens on machinery, equipment and fixtures; lease assignments; and personal guarantees from individuals with 20 percent or more ownership in the company.

Interim Financing
Only a completed project can assure the small business of the operating capacity needed to make payments to the SBA, so interim financing will be needed for all projects. The interim financing (frequently provided by the third party lender) provides the needed capital at project start and is repaid from SBA loan proceeds.

Security
The bank has the security of a first mortgage on the land and building or equipment being financed, as well as any other collateral involved. The SBA is secured by a second mortgage.

A Small Business Must Meet the Following Criteria to Qualify for SBA 504 Loan Assistance
Its net worth must not exceed $8.5 million and its average net income after taxes for the preceding two years
must not exceed $3 million.
It must be a for-profit corporation, partnership, or proprietorship.
Its project must demonstrate a significant economic impact on the community in which it is located, primarily
through job creation or retention.

Ineligible Businesses
They include, among others, investment companies, gambling facilities, lending institutions, such as banks
or financing companies, churches, and other not for profit companies.