Every year SBA issues updates to its SOP, the standard operating procedures for its lending programs, including the SBA 504.  Some of the most notable changes that became effective on January 1, 2018, include:


Borrower Contribution

The updated typical 504 project structures (if credit quality is acceptable) are:

  • 50-40-10% – Business in operation >2 years, NOT special purpose property
  • 50-35-15% – Special purpose OR <2 years operation (most change of ownerships will be in this category)
  • 50-30-20% – Special purpose + <2 years operation AND borrower + affiliates have more than one project that is a limited/special use must contribute 20% for each project after the first project


Limited or Special Purpose Properties

A limited-market property with a unique physical design, special construction materials, or a layout that restricts its utility to the use for which it was built.  Below is a list that contains examples of properties that SBA considers to be a Limited or Special Purpose Property.  This list is not intended to be all-inclusive:

  • Amusement parks;
  • Bowling alleys;
  • Car wash businesses;
  • Cemeteries;
  • Cold storage facilities w/ > than 50% of total sq. ft. equipped for refrigeration;
  • Dormitories;
  • Farms, including livestock and dairy facilities;
  • Funeral homes with crematoriums;
  • Gas stations;
  • Golf courses;
  • Hospitals, surgery centers, urgent care centers, and other health or medical facilities;
  • Hotels, motels and other lodging facilities;
  • Marinas;
  • Mines;
  • Nursing homes, including assisted living facilities;
  • Oil wells;
  • Quarries, including gravel pits;
  • Railroads;
  • Sanitary landfills;
  • Service centers (oil and lube, brake or transmission centers) w/ pits and in-ground lifts;
  • Sports arenas;
  • Swimming pools;
  • Tennis clubs;
  • Theaters; and
  • Wineries



The language has been changed related to who is required to provide a guarantee:

  • 20% or more owners of EPC and OC
  • Combined ownership of spouses in the EPC or OC totals 20% or more, both spouses must guarantee
  • Owned by a trust, beneficiary with any control over the actions of the Trust, the beneficiary must gurantee the loan
  • Anyone deemed to provide meaningful oversight (involvement in the decisions made concerning the business, which includes a management agreement that provides for the Applicant business to approve the annual budget, approve any capital expenditures or operating expenses over a significant dollar threshold, have control over bank accounts, or have oversight over the employees operating the business [who must be employees of the Applicant business])
  • Appropriate guarantees can be required without regard to ownership



Must be current on all federal, state and local taxes, including, but not limited to, income taxes, payroll taxes, real estate taxes and sales taxes.


Please keep in mind…Growth Corp keeps track of all these changes so you don’t have to.  As an Accredited Lender with the SBA, and with over 25 years of experience focusing on SBA 504 lending, you can trust us to get it right. 

Historic Properties and Financing with Historic Rehabilitation Tax Credits

Properties on the National Historic Register may be eligible. Must go through pre-clearance with SBA before an application may be submitted.  SBA may participate in project with tax credits:

  • Lease to Tax Credit Investor w/ lease back to borrower (term = 504 term)
  • Borrower must own real estate (no passive R/E holding co)
  • Comply with IRS requirements


EPC (Passive Real Estate Holding Companies)

It is permissible to have a passive real estate entity hold title to the project property.

  • The EPC must lease 100% of the property to the business. Business may sublease minor portion of the property (occupancy guidelines below)
  • The EPC cannot be involved in any activities other than leasing the project property to the small business, except if EPC is a trust
  • Owner’s of EPC guarantee too (guidelines for guarantees discussed above)
  • Rent payment between the EPC and OC cannot exceed the debt service payments on the TPL loan, the 504 loan and the EPC’s direct expenses of holding the property such as routine maintenance, insurance, and taxes. Lease payments may not include accelerated payments on the TPL loan.

504 may now finance the change of ownership between existing owners of an EPC as long as the real estate has been held by the entity for at least 36 months.  Also, the loan proceeds may be used to finance a stock or ownership purchase if the underlying assets are limited to real estate and/or other eligible long-term fixed assets.  Ineligible assets (such as escrow accounts, replacement reserves, etc.) must be directly related to the eligible long-term fixed assets, must be de minimis, and may not be included in the Project Financing.  Must also:

  • Justify that jobs would be lost without the change of ownership; and
  • Real estate must have a remaining useful life of 20 years or a weighted average remaining useful life between 10 and 20 years for mixed collateral.


Maximum 504

Multiple SBA loans are acceptable, so long as they don’t exceed the SBA maximum:

  • Energy projects and manufacturers:  each project cannot exceed $5.5 million in 504 dollars — NOW CAPPED at a total of $16.5 million total SBA dollars
  • All others still capped at $5 million total SBA dollars


Please keep in mind…Growth Corp keeps track of all these changes so you don’t have to.  As an Accredited Lender with the SBA and with over 25 years of experience focusing on SBA 504 lending, you can trust us to get it right.  If you have any questions, please contact a Growth Corp Loan Officer.