Call for Free Consultation (858) 876 4597

The SBA CDC/504 Loan: Brick and Mortar Financing

Brick and Mortar Financing with SBA Loan from The Startup Garage

The CDC/504 loan program is a long-term financing tool for economic development within a community. The 504 Program provides small businesses requiring “brick and mortar” financing with long-term, fixed-rate financing to acquire major fixed assets for expansion or modernization. A Certified Development Company (CDC) is a private, nonprofit corporation set up to contribute to the economic development of its community. CDCs work with SBA and private sector lenders to provide financing to small businesses.

The maximum SBA loan is $1.5 million when meeting the job creation criteria or a community development goal. Generally, a business must create or retain one job for every $65,000 provided by the SBA except for small manufacturers, which have a $100,000 job creation or retention goal (see below). The maximum SBA loan is $2.0 million when meeting a public policy goal, which includes:

  • Business district revitalization
  • Expansion of exports
  • Expansion of minority business development
  • Rural development
  • Increasing productivity and competitiveness
  • Restructuring because of federally mandated standards or policies
  • Changes necessitated by federal budget cutbacks
  • Expansion of small business concerns owned and controlled by veterans (especially service-disabled veterans)
  • Expansion of small business concerns owned and controlled by women

The maximum loan for small manufacturers is $4.0 million. A small manufacturer is defined as a company that has its primary business classified in sector 31, 32, or 33 of the North American Industrial Classification System (NAICS) and all of its production facilities located in the United States. To qualify for a $4.0 million 504 loan, the business must meet the definition of a small manufacturer and:

  1. Either create or retain at least one job per $100,000 guaranteed by the SBA [Section 501(d)(1) of the Small Business Investment Act (SBI Act)]
  2. Or improve the economy of the locality or achieve one or more public policy goals [sections 501(d)(2) or (3) of the SBI Act].


Proceeds from 504 loans must be used for fixed asset projects, such as:

  • Purchasing land and improvements, including existing buildings, grading, street improvements, utilities, parking lots and landscaping
  • Construction of new facilities or modernizing, renovating or converting existing facilities
  • Purchasing long-term machinery and equipment

What Banks Are Looking For

To be eligible for a CDC/504 loan, the business must be operated for profit and fall within the size standards set by the SBA. Under the 504 Program, the business qualifies as small if it does not have a tangible net worth in excess of $7.5 million and does not have an average net income in excess of $2.5 million after taxes for the preceding two years. Loans cannot be made to businesses engaged in speculation or investment in rental real estate.

Whether you have a question about SBA Brick and Mortar Financing, or you’d like to discuss our business plan writing services, feel free to contact us for a free consultation!