SBA rules · SOP 50 10 8.1
What is the SBA 504 job creation requirement?
A standard 504 project must create or retain one job opportunity per $95,000 guaranteed by SBA, unless it qualifies under a higher dollar threshold, an alternative economic development objective, or an exception.
Quoted from SBA SOP 50 10 8.1Every quote checked word for word
In detail
- Standard requirement: A standard 504 project must create or retain one job opportunity per $95,000 guaranteed by SBA.
- Small manufacturers and energy projects: For a project of a Small Manufacturer or a project that meets an Energy Public Policy Goal, the requirement is one job opportunity per $150,000 guaranteed by SBA.
- Alternative objectives and CDC portfolio average: A project that achieves an eligible Community Development or Public Policy Goal instead of direct job creation or retention is eligible if the CDC's overall portfolio meets the required job opportunity average of one per $95,000 guaranteed, or one per $150,000 for projects under other economic development objectives or located in Special Geographic Areas.
- Debt refinance without expansion: If a debt refinancing project without expansion does not meet job creation or other economic development objectives, the 504 loan cannot exceed $95,000 multiplied by the number of employees of the borrower.
- Debenture reduction: If a 504 project cannot satisfy any of the economic development objectives or portfolio guidelines, the debenture amount must be reduced to meet the job creation or retention requirement.
The source
What the SOP says
“A Project must create or retain one job opportunity per $95,000 guaranteed by SBA except that, in the case of a Project of a Small Manufacturer (defined as a small business with its primary NAICS Code in Sectors 31, 32, and 33 with all its production facilities located in the United States) or a project that meets an Energy Public Policy Goal, the Project must create or retain one job opportunity per $150,000 guaranteed by SBA.
“For Projects that are eligible under 13 CFR 120.862, “Other economic development objectives,” a CDC’s portfolio must reflect an average of one job opportunity for every $150,000 guaranteed by SBA;
“A CDC’s portfolio must maintain a job opportunity average of one Job Opportunity created or retained for every: $95,000 guaranteed by SBA; or $150,000 guaranteed by SBA for Projects located in Special Geographic Areas (Alaska, Hawaii, State-designated enterprise zones, empowerment zones, enterprise communities, Opportunity Zones2F2F2F, and labor surplus areas) A CDC may choose to separate these loans from the remainder of its portfolio for the purpose of calculating the averages.
“If the 504 Project cannot satisfy any of these Economic Development Objectives and guidelines described above, then the amount of the debenture must be reduced to meet the job creation or retention requirement.
“Notwithstanding 13 CFR § 120.860, a debt may be refinanced under this Paragraph 10 if the Refinancing Project does not meet the job creation or other economic development objectives set forth in 13 CFR § 120.861 or 13 CFR § 120.862. In such case, the 504 loan may not exceed the product obtained by multiplying the number of employees of the Borrower by $95,000.
Have a deal in mind?
Tell us about it and we will tell you how these rules apply, and which lenders finance deals like yours.
More on sba 504
Related reading
SBA 7(a) vs 504: Which Loan Is Right for Your Deal?SBA Decouples the 7(a) and 504 Loan Limits: What This Means for Combination DealsStop Burning Money on Rent: How to Buy Your Building with Zero Down
This page quotes the SBA's Standard Operating Procedure 50 10 8.1. Lenders can ask for more than the SBA minimum. It is general information, not a loan approval or legal advice.