Frequently Asked Questions About the SBA 504 Program



Q. What if my small business expansion includes creating work efficiencies to limit the number of jobs created? Can I still qualify for SBA 504?

A. Most small business projects involve the creation of jobs; however, some involve just a change of ownership, a business that is not labor intensive, or improved technology that eliminates the need for manpower. These situations are still eligible for SBA 504 if they meet one of SBA’s Public Policy goals of Rural Development, Woman/Minority/Veteran Ownership, Expansion of Exports, or Area Development.

Q. Are self-storage units eligible for SBA 504 financing?

A. Purchase or construction of mini warehouses and self-storage units are an eligible use of SBA 504 funds.

 Q. Does SBA allow a borrower to act as its own contractor on a small business project?

A. “Do-it-Yourself” construction is allowed if the following three criteria are met: (1) the borrower/contractor is experienced in the type of construction and has all appropriate licenses, (2) the cost is the same as, or less than, what an unaffiliated contractor would charge as evidenced by two outside bids on the work, and (3) the borrower/contractor will not earn a profit on the construction.

 Q. Since SBA 504 is designed to finance owner-occupied commercial real estate, will SBA permit leasing a portion of the space?

A. To be eligible with new construction, the borrower needs to occupy 60% of their newly constructed building at the time of closing, with plans to occupy another 20% within 3 years. For existing buildings, the borrower needs to occupy 51% of their building.

Q. What can be used to meet the requirement of borrower equity in an SBA 504 project?

A. Land already owned or cash can be used to meet the borrower injection required for SBA 504. Land value will be determined by an appraisal unless it was purchased within the last two years. Business owners may borrow against personal assets and use the cash as their SBA 504 injection (i.e. a home equity loan).