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SBA 504 Loan Program

Objectives and General Information  

The 504 Loan Program is the Economic Development Program of the U.S. Small Business Administration. A fixed-asset financing program for expanding businesses, it is the first federal financing tool to recognize the importance of small business job creation through physical plant expansion. The Bucks County Economic Development Corporation, in conjunction with the Chester County Development Council, which is Southeastern Pennsylvania’s certified Development Corporation for 504 loans, can assist you in an application for the Small Business Administration (SBA) 504 loan.    

Type of Financing 

The proceeds from a "504" loan may be used only for fixed-asset financing: plant acquisition, construction, renovation or expansion, including acquisition of land. Proceeds may be used for land and site improvements, acquisition and installation of machinery and equipment, and interest on interim financing. Project costs may also include professional fees directly attributable and essential to the project. The minimum total project cost is $200,000.00. For every $35,000.00 of "504" funds, one full-time permanent job must be created or retained within 2 years.    


The business must have less than 500 employees. Net worth of the company must not exceed $6,000,000.00 and the average net income after taxes for the preceding 2 years must not exceed $2,000,000.00. The business must be a for-profit corporation, partnership or proprietorship with a "sound business" purpose.   

Interest Rate and Term of Loan 

A maximum of 40% of the project cost may be obtained through SBA 504, or $1,500,000.00, whichever is less. In some instances the SBA amount can be $2,000,000. The loan carries a fixed rate of interest set at the time of debenture with a term of 20 years for real estate and 10 years for equipment, usually secured by a second lien.  

Typically 50% of the project cost is provided by a private financial institution. This is a conventional bank loan secured by a first lien on the assets. The bank provides interim financing to the applicant from the date of settlement until the "504" is sold. A minimum of 10% comes from equity. NOTE: Substantial penalties result if the loan is pre-paid prior to maturity. Current rate is 5.5%.   


The SBA requires that listed fees be funded as part of the debenture to include: $1,500.00 processing fee deposit; Seed Co. processing fee of 1.5% of loan; Fiscal Agent Reserve Account of 1/2% (0.005) of loan; Seed Co. legal Fees, not to exceed $3,500.00; and funding and underwriter’s fees, approximately 0.009 x the loan amount.

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