Using a 504 program for small business expansion

What is a 504 program?
Also referred to as a CDC/504 program, this is a type of long-term loan for growing small businesses. The CDC is a Certified Development Company, a corporation that is designed to help improve economics within a community. Together with the SBA and other lenders, they work to find financing for small businesses.

This type of loan primarily to boost economic development within a community through small business expansion. This is done in a number of ways, and the goals of 504 program are to provide financing for small businesses that can meet public policy goals, some of which include:

• Revitalize failing business districts


• Develop more rural areas


• Expand the number of small businesses operated and owned by minorities, women, and veterans


• Expand the number of exports leaving the area


• Increase the overall productivity of a community

With the 504 program, eligible businesses receive a long-term, fixed rate loan to purchase land or buildings for their business. The loans range from 10 to 20 years, and the interest rate and fees vary depending on the amount of money you borrow.

How much money does the 504 program provide?
The maximum amount of money a small business can receive from the 504 program is dependent on a number of qualifications, including the type of business. There are three different maximum amounts:

• $1.5 million. To qualify for this amount, your small businessmust create and retain at least one job for every $50,000 loaned by the SBA.


• $2 million. Small businesses qualify for this amount when their business expansion will meet any of the public policy goals discussed above.


• $4 million. This is the maximum amount if your business qualifies as a Small Manufacturer. This type of business must have all of its products facilities located in the United States. It must also meet at least one of the public policy goals, and create and retain at least one job for every $100,000 of the loan.

What are the funds used for?
The CDC/504 Program has specific regulations regarding what your small business can use the expansion money for. These include:

• The money must be used to purchase "fixed assets." Examples of these are land, existing building, improvements to streets and parking lots, landscaping, construction for new buildings or plants, renovation or improvements, or machinery and other long-term equipment.


• The money can't be used as working capital.


• You can't use 504 money to repay current loans.

How can I qualify for a 504 loan?
If you would like to expand your business through the 504 program, there are a number of eligibility requirements. These include:

• The business must be a "small" business. The SBA has size requirements that must be met for a business to be qualified as small. Your business can't have a net worth of more than $7.5 million. In addition, your net income must be lower than $2.5 million after taxes.


• Real estate investment businesses are not eligible for the 504 Program.

The CDC/504 program is a long-term loan program that can help you to achieve your business expansion goals. By ensuring that your business meets carefully defined requirements, using the 504 program for small business expansion is also beneficial to developing communities and improving the economy.