SBA 504 Program Expands to Help More Small Businesses Access Capital

Margaret Griffin, EVP, Chief Lending Officer at SomerCor
SomerCor

The SBA 504 loan program provides a long-term, fixed rate for business owners to build, buy, and refinance fixed assets – like commercial real estate and heavy equipment.

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To increase the impact of the U.S. Small Business Administration’s (SBA) premier economic development initiative, the agency made enhancements to the SBA 504 loan program in 2024, including:

SBA Doubles Down on Green Energy Loans

In the spring of 2024, the SBA removed a cap on Energy Public Policy projects financed by the 504 Loan Program. These projects are also referred to as SBA 504 Green Loans.

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Now there is no limit on the number of Green Loans a borrower can take out or the aggregate dollar amount that can be borrowed for these projects. Green loans are a great financing solution for small and mid-size businesses seeking to incorporate energy efficient elements or renewable energy technologies into commercial real estate projects.

To take advantage of the SBA 504 Green Loan program, the project must either reduce energy consumption by at least 10% through building upgrades or generate at least 15% renewable energy through upgrades.

SBA Increases 504 Loan Program Access for Mid-Size Businesses

To increase access to the SBA 504 loan program, the SBA updated the alternative size standards for inflation. Now an SBA 504 applicant’s tangible net worth is capped at $20 million (up from $15 million), and the average net income after federal income taxes for the two fiscal years before application cannot be more than $6.5 million (up from $5 million). Should an applicant exceed these numbers, the size standard can instead be calculated by maximum employee count based on their industry.

SBA Streamlines SBA 504 Refinance Program

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The SBA 504 refinance program helps small and mid-size businesses take advantage of lower interest rates and access equity for working capital.

In the fall of 2024, the SBA updated the program to streamline the loan process and expand borrower eligibility. Businesses who have taken out loans since interest rates started rising in the spring of 2022, can likely benefit from being able to refinance those debts with the SBA 504 refi. Key program changes include:

Both commercial loans and other government debt – including SBA 7(a) and existing 504 loans – are eligible for refinancing. To qualify, the business must be in operation for at least two years and the property must be at least 51% owner-occupied.

The SBA 504 program has grown in popularity and expanded its reach in 2024. Connect with a member of the SomerCor team today at www.somercor.com to learn how the SBA 504 loan can help your business or your business client.

— Margaret Griffin – EVP, Chief Lending Officer at SomerCor