The US Small Business Administration 504 Loan or Certified Development Company program is designed to provide financing for the purchase of fixed assets, which usually means real estate, buildings and machinery, at below market rates. As part of its mission to promote the development of businesses, the SBA offers a number of different loan programs tailored to specific capital needs of growing businesses.
In order to qualify for the program, the borrower must meet the SBA's definition of small business and must plan to use over half (51%) of the property for its own operations within one year of ownership; if the building is to be newly constructed the borrower must use 60% at once and plan to occupy 80%. The borrower may form a real-estate holding company that lease 100% to the operating business, which then subleases surplus space (up to 49%). To qualify for this program, U.S. citizens or permanent residents must hold a majority of the ownership of the operating companies and the holding company. As of 2009, the 504 Loan does not contain any restrictions or ceilings; however, there are three criteria for eligibility:
The company's average net income cannot surpass $5 million after taxes for the preceding two years.
The anticipated project size must be greater than the personal, non-retirement, unencumbered liquid assets of the guarantors/principals.
Does not have a tangible net worth in excess of $15 million