The US Small Business Administration 504 Program is designed to provide financing for the purchase of fixed assets at a fixed rate throughout the entire life of the loan. Operating as a Certified Development Company (CDC), Ocean State Business Development is a nonprofit corporation established to contribute to the economic development of local communities in Rhode Island, Massachusetts, and Connecticut.
- Operate as a for-profit company
- Do business (or propose to) in the United States
- Has a tangible net worth less than $15 million and an average net income less than $5.0 million after taxes for the preceding two years.
- Ability to repay the loan on time from the operating cash flow of the business
A 504 loan can be used for:
- The purchase of land, including existing buildings
- The purchase of improvements, including grading, street improvements, utilities, parking lots and landscaping
- The construction of new facilities or modernizing, renovating or converting existing facilities
- The purchase of long-term machinery and equipment
- Consolidating, repaying or refinancing debt (in most cases- please ask your lender)
Ineligible businesses include those engaged in illegal activities, loan packaging, speculation, multi-sales distribution, gambling, investment or lending, or where the owner is on parole/ probation. Specific types of businesses not eligible include:
- Real estate investment firms when the loan is used for investment purposes.
- Firms involved in speculative activities that develop profits from fluctuations in price rather than through the normal course of trade, such as wildcatting for oil and dealing in commodities futures, when not part of the regular activities of the business.
- Firms involved in lending activities, such as banks, finance companies, factors, leasing companies, and any other firm whose stock in trade is money.
- Pyramid sales plans, where a participant’s primary incentive is based on the sales made by an ever-increasing number of participants.
- Firms involved in illegal activities.
- Gambling activities, including any business whose principal activity is gambling. The rule does not restrict loans to businesses that obtain less than one-third of their annual gross income from either the sale of official state lottery tickets under a state license, or legal gambling activities licensed and supervised by a state authority.
- Non-Profit, Religious, or eleemosynary institutions, government-owned corporations, consumer and marketing cooperatives, and churches and organizations promoting religious objectives.
A 504 loan can not be used for:
- Working capital or inventory unless in certain “Debt Refinance” scenarios
- Speculation or investment in rental real estate