SBA rules · SOP 50 10 8.1

What can an SBA 504 loan be used for?

SBA 504 loan proceeds may be used to finance eligible long-term fixed assets and directly related project costs, including real estate, machinery and equipment, professional fees, interim financing costs, contingency funds, and qualifying debt refinancing.

Quoted from SBA SOP 50 10 8.1Every quote checked word for word

In detail

Real estate and site improvements: Proceeds may be used to acquire land (by purchase or lease), purchase existing buildings, construct new buildings, or convert, expand, or renovate existing buildings, as well as make necessary land improvements such as grading, streets, parking lots, utilities, and landscaping.
Machinery, equipment, and fixtures: Proceeds may finance the purchase, transportation, dismantling, or installation of machinery and equipment having a useful life of at least 10 years at a fixed location, as well as essential, minor furniture and fixtures that do not affect the weighted average maturity.
Project soft costs and interim financing: Allowable project costs include essential professional fees directly attributable to the project (such as title searches, surveys, and zoning, excluding attorney fees incurred in closing interim and third-party loans), short-term bridge debt of 3 years or less, repayment of interim financing (including points, fees, and interest), and a construction contingency fund up to 15%.
Debt refinancing and changes of ownership: A 504 project may refinance qualified commercial debt with an expansion (up to 100% of expansion costs) or without an expansion (subject to specific loan-to-value limits and eligible business expenses), and may finance eligible long-term fixed assets in a change of ownership that creates or retains jobs.
Administrative costs: Eligible administrative costs (such as the SBA guaranty fee, funding fee, CDC processing fee, and legal/closing fees) are not part of eligible project costs, but are financed by adding them to the Net Debenture to arrive at the Gross Debenture amount.

The source

What the SOP says

“Acquire land (by purchase or lease) as part of an eligible project;

SOP 50 10 8.1, Chapter 3: Uses of Proceeds > Eligible Uses of Proceeds (lines 763-772)✓ Verified

“Acquire (by purchase or lease) and install fixed assets (for a 504 loan, these assets must have a useful life of at least 10 years and be at a fixed location, although short-term financing for equipment, furniture, and furnishings may be permitted where essential to and a minor portion of the 504 Project);

SOP 50 10 8.1, Chapter 3: Uses of Proceeds > Eligible Uses of Proceeds (lines 763-772)✓ Verified

“The machinery and equipment must have a useful life of at least 10 years;

SOP 50 10 8.1, Chapter 1: Eligibility through Submission of Application > Machinery and Equipment (lines 3170-3173)✓ Verified

“If essential to and a minor part of the Project which will not affect the weighted average maturity;

SOP 50 10 8.1, Chapter 1: Eligibility through Submission of Application > Furniture and Fixtures (lines 3174-3175)✓ Verified

“If directly attributable and essential to the Project with the exception of attorney’s fees incurred in closing the Interim and Third Party Loans. Examples of project-related costs that may be included in this section are title insurance; title searches and abstract costs; surveys; and zoning matters;

SOP 50 10 8.1, Chapter 1: Eligibility through Submission of Application > Professional Fees (lines 3176-3177)✓ Verified

“Repayment of interim financing including points, fees, and interest;

SOP 50 10 8.1, Chapter 1: Eligibility through Submission of Application > Interim Financing (lines 3182-3183)✓ Verified

“May not exceed 15% of the Project construction costs:

SOP 50 10 8.1, Chapter 1: Eligibility through Submission of Application > Contingency Fund (lines 3184-3187)✓ Verified

“The administrative costs set out in 13 CFR § 120.883 are not part of the Project costs but are added to the Net Debenture to calculate the Gross Debenture amount.

SOP 50 10 8.1, Chapter 1: Eligibility through Submission of Application > Eligible Administrative Costs (lines 3336-3341)✓ Verified

“The 504 Project finances only the costs associated with eligible long-term fixed assets; the acquisition of any other assets such as receivables or goodwill is not an eligible use of 504 loan proceeds or Third Party Loan proceeds and must be financed by other means, which may include a 7(a) loan;

SOP 50 10 8.1, Chapter 1: Eligibility through Submission of Application > Change of Ownership (lines 3342-3353)✓ Verified

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