How Much Do I Need to Occupy?

SBA 504 is used to directly assist small businesses, which is the reason for SBA’s distinct occupancy guidelines. SBA 504 financing is designed for owner-occupied commercial real estate (and equipment). However, leasing a portion of the commercial space is allowed. To be eligible, the borrower must meet SBA’s requirements below:

For New Construction
Borrower or operating company needs to occupy 60% of their newly constructed building at the time of closing, with plans to occupy another 20% within 3 years. Borrower may lease up to 20% of the property long term to third parties.

For Existing Buildings
Borrower or operating company needs to occupy 51% of their existing building and 100% of the renovated property at the time of closing.

These requirements basically eliminate using SBA 504 to finance strip malls, as they are typically not owner-occupied. Condominium units are becoming more popular and would be eligible under this program.