Can SBA 504 Loans Be Used For Office Buildings?
One of the largest segments of commercial construction involves the development of office buildings. This segment of the economy has grown at a relatively fast rate, expanding by 11.3% since 2013. And, the commercial construction sector is expected to generate $227 billion in 2018. making it one of the largest industries in the U.S. Of course, constructing office buildings is not cheap, but SBA 504 loans can help businesses offset these costs.
Uses and Eligibility for SBA 504 Loans
If you're a business who wants to use an SBA 504 loan to construct a new office building, you're in luck. The 504 loan offers some of the most incredible rates on the market, with fixed interest rates currently hovering around 5%. However, in order to qualify, you'll need to occupy at least 60% of the building for the duration of your SBA 504 loan. In contrast, if you use your SBA 504 loan funds to buy an existing structure, you'll only need to occupy 51% of the structure.
Keep in mind that SBA 504 loans are not intended for real estate developers, nor are they intended for working capital. This means that you cannot use an SBA 504 loan to construct a building just to sell it or rent it out to other tenants. If you own a commercial construction company, however, you can use the funds to buy or build a new headquarters, or to improve your current headquarters. They can also be used to purchase heavy equipment, such as bulldozers, wrecking balls, HVAC units, elevators, loading dock systems, and more.
Additionally, the flexible terms available with these loans allow you to choose the best payoff window based on your expected tenancy needs. The loan can also be assumed (with a qualifying applicant) if you find a buyer interested in taking the entire property off your hands.
SBA 504 Loan Borrowers Can Access Additional Funds With The "Going Green" Program
While traditional 504 loans have a $5 million cap per business, the SBA's "going green" program offers significantly more funds to borrowers who make a serious effort to reduce their energy use. Qualifying businesses can get up to $5.5 million in loans per project, and can take out up to $5.5 million per qualifying project in 504 loans as a whole. In order to qualify, a business must reduce their current building's energy use by 10%, renovate their building in order to reduce its energy use by 10%, or get 10% of their building's energy from alternative sources, such as wind, solar, or geothermal.
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What are the benefits of an SBA 504 loan for office buildings?
The SBA 504 loan offers some of the most incredible rates on the market, with fixed interest rates currently hovering around 5%. Additionally, the flexible terms available with these loans allow you to choose the best payoff window based on your expected tenancy needs. The loan can also be assumed (with a qualifying applicant) if you find a buyer interested in taking the entire property off your hands.
What are the eligibility requirements for an SBA 504 loan for office buildings?
The SBA 504 loan offers some of the most incredible rates on the market, with fixed interest rates currently hovering around 5%. To qualify for an SBA 504 loan for office buildings, you must occupy at least 60% of the building for the duration of the loan. If you use the loan funds to buy an existing structure, you must occupy 51% of the structure. Additionally, SBA 504 loans are not intended for real estate developers, nor are they intended for working capital. This means that you cannot use an SBA 504 loan to construct a building just to sell it or rent it out to other tenants. The loan can also be assumed (with a qualifying applicant) if you find a buyer interested in taking the entire property off your hands.
What are the maximum loan amounts for an SBA 504 loan for office buildings?
The maximum loan amount for an SBA 504 loan for office buildings is $5 million per business. However, the SBA's "going green" program offers significantly more funds to borrowers who make a serious effort to reduce their energy use. Qualifying businesses can get up to $5.5 million in loans per project, and can take out up to $5.5 million per qualifying project in 504 loans as a whole.
For more information, please see SBA 504 Loans for Office Buildings.
What are the interest rates for an SBA 504 loan for office buildings?
The interest rate on the SBA-guaranteed (CDC) portion is fixed for the full term and set at the monthly SBA debenture sale, not by the individual lender: debenture rates were 5.04% for 25-year, 5.01% for 20-year, and 4.69% for 10-year loans at the July 2026 sale (Eagle Compliance, fiscal agent for the SBA 504 program). The bank's first-lien portion is priced by the bank and may be fixed or variable, subject to SBA's quarterly-published maximum. It's important to note that, while the rates from a traditional bank may be higher than expected, these commercial real estate loan rates are still considered better than those you will see elsewhere. It is also taken with the CDC loan, which is treated as a traditional property mortgage payment, with a fixed rate that can last 10, 20, or 25 years.
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What are the repayment terms for an SBA 504 loan for office buildings?
The repayment terms for an SBA 504 loan for office buildings depend on the loan amount and the length of the loan. Generally, the loan can be repaid over 10, 20, or 25 years, with the maximum loan amount being $5 million. The interest rate is fixed and currently hovers around 5%. Additionally, the flexible terms available with these loans allow you to choose the best payoff window based on your expected tenancy needs. The loan can also be assumed (with a qualifying applicant) if you find a buyer interested in taking the entire property off your hands.
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