Established in 1984, SETEDF is a non-profit Certified Development Company that promotes economic development within the community through the Small Business Administration SBA 504 Loan Program.

We are regulated by the federal government and work with participating lenders (typically banks & credit unions) to provide capital in the form of long term loans to small businesses.

SBA 504 Basics

What is the 504 Loan Program?

The SBA 504 Loan program is a powerful economic development loan program that offers small businesses another avenue for business financing, while promoting business growth and job creation.

The 504 Loan Program is designed to provide financing for the purchase of fixed assets such as real estate, and building acquisitions, as well as equipment and machinery, at below market rates. Interest rates are fixed for the term of the loan which can be 10, 20 or 25-year terms depending upon the project.

Project Size

$250,000 to $15,000,000

Borrower's Down Payment

10% - Most Projects

15% - Start-up (less than 2 years in operations) or special-purpose properties

  • Amusement parks
  • Bowling alleys
  • Car wash businesses
  • Cemeteries
  • Cold storage facilities where more than 50% of total square footage is 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 healthy 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 ( e.g., oil and lube, brake or transmission centers) with pits and in-ground lifts
  • Sports arenas
  • Swimming pools
  • Tennis clubs
  • Theaters
  • Wineries

20% - Start-up and special-purpose properties

Understanding the SBA 504 Loan Structure

SBA 504 loans can be a bit confusing. However, once you understand the loan structure you will easily see how the SBA 504 loan program is the ideal financing option for small businesses.

The typical financing structure for a SBA 504 loan is a 50-40-10 partnership. The third-party lender (bank or credit union) will finance 50% of the project; SETEDF/SBA finances 40% and; the borrower provides at least 10% equity injection.

This structure makes it possible for small business owners to own commercial real estate with less money down.

The long-term and fixed interest rate also allows the borrower to preserve cash flow for operations.

SBA 504 Loan Structure :

1st Mortgage / Third Party Lender $1,000,000
2nd Mortgage / SETEDF-SBA Portion $800,000
Equity $200,000
Total Project Cost $2,000,000

Conventional Loan at Market Rates

  • Miniumum 10-year optional term for a 20-year debenture
  • Rates and fees set by Lender
  • Assumable loan

Below Market, Fixed Rate Bond with an SBA Guarantee Loan

  • 10, 20 or 25-year term
  • No balloons, calls or covenants
  • Fixed Interest rate at below market rate, fixed for the entire loan term
  • Assumable loan

Equity Injection / Down Payment

  • Cash
  • Can use equity in land if already purchased
  • Can use prepaid soft costs, like architectural or engineering fees

* 15% equity requirement on special use properties or start up businesses; 20% for special use properties and start-up businesses.

51% for purchases of an existing building (renovations and expansions are eligible)
60% for ground-up construction projects (additional 20% within 3 years and another additional 20% within 10 years)

$5 million maximum, or …
$5.5 million for manufacturers, or …
$5.5 million if business is reducing their energy consumption by 10% (Green Initiative)
No maximum limit placed on lending partner’s loan portion

Fixed Rate based on Treasury rates
Rate is locked-in when SBA funds the debenture
See Historical Rates here

Fully-amortized over the life of the loan (no balloon)
Real estate project options = 10, 20 or 25-year terms
Machinery & equipment (if financed separate from real estate) = 10 years normally but eligible for 20 and 25 years depending on the life of the equipment.
Leasehold improvements = 10 years

Real Estate (owner occupied)

  • Existing Buildings
  • Addition / Major Renovation
  • Land / Building Construction

Machinery and Equipment

  • Minimum 10 Year Life
  • If used Equipment - Appraisal is necessary

Soft Costs and Professional Fees

  • Appraisal, Environmental, Architectural Fees, Engineering Cost & Survey Fees
  • Title Insurance, Recording Taxes and legal fees related to zoning, permits, or platting
  • Closing Costs, Bank Points & Interim Interest and fees

Improvements such as grading, paving, landscaping, curb and gutter, etc. (although no more than 5% of total project costs can be for community improvements.)


  • 504 Refinance with Expansion and without expansion is available
  • Working Capital
  • Inventory
  • Goodwill Assets from Business Acquisition
  • Tenant Improvements
  • Franchise Fees
  • Rolling Stock (i.e. vehicles)
  • Legal entity - corporation, partnership, sole proprietor, limited liability company
  • Owners must be U.S. citizens or legal permanent residents
  • Business must be located in the United States
  • Tangible net worth not to exceed $20 million and average net income not to exceed $6.5 million (2-year average)
  • Non-profit businesses
  • Businesses primarily engageed in lending (i.e. Banks, finance companies)
  • Passive businesses (i.e. apartments, shopping centers)
  • Life insurance companies
  • Businesses located in a foreign country (businesses in the U.S. owned by aliens may qualify)
  • Pyramid sale distribution plans
  • Businesses deriving more than one-third of gross annual revenue from legal gambling activities
  • Businesses engaged in any illegal activity
  • Private clubs and businesses which limit memberships
  • Government-owned entities (except for businesses owned or controlled by a Native American Tribe)
  • Loan packagers earning more than one third of their gross annual revenue from packaging SBA loans
  • Businesses in which the Lender or CDC, or any of its associates owns an equity interest
  • Businesses engaged directly or indirectly in a prurient sexual nature
  • Businesses with prior government defaults
  • Businesses primarily engaged in political or lobbying activities
  • Speculative businesses (such as oil wildcatting)

One of the primary purposes of the SBA 504 loan program is job creation. The SBA 504 loan must create or retain one job opportunity per the designated amount as specified by the SBA. Currently, the requirement is one job opportunity per $90,000.00 in project dollars that is being funded. For manufacturers, this amount increases to $140,000.

A Job Opportunity is defined as jobs created or jobs retained because of the 504 Loan.

Job opportunity requirements can be waived if a public policy goal is satisfied.

Public Policy Goals

Women, minority, or veteran owned (ownership of 51% or more)
Rural development
Revitalizing economic development areas
Expanding exports
Projects that reduce energy consumption by at least 10% or generated renewable energy or fuels (Green Initiative)

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