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The Ultimate Guide to Understanding SBA 504 Loan Program: SBA Feasibility Study Guide

What is the 504 loan program?

The 504 Loan Program provides long-term, fixed rate financing for major fixed assets that promote business growth and job creation.

504 loans are available through Certified Development Companies (CDCs), SBA's community-based partners who regulate nonprofits and promote economic development within their communities. CDCs are certified and regulated by SBA.

The maximum loan amount for a 504 loan is $5.5 million. For certain energy projects, the borrower can receive a 504 loan for up to $5.5 million per project, for up to three projects not to exceed $16.5 million total.

SBA 504 Loan Program -
SBA 504 Loan Program -

Am I eligible?

To be eligible for a 504 loan, your business must: 

  • Operate as a for-profit company in the United States or its possessions

  • Have a tangible net worth of less than $15 million

  • Have an average net income of less than $5 million after federal income taxes for the two years preceding your application

Other general eligibility standards include  falling within SBA size guidelines, having qualified management expertise, a feasible business plan, good character and the ability to repay the loan.

Loans cannot be made to businesses engaged in nonprofit, passive, or speculative activities. For additional information on eligibility criteria and loan application requirements, small businesses and lenders are encouraged to contact a Certified Development Company in their area.

How do I use a 504 loan?

A 504 loan  can be used for a range of assets that promote business growth and job creation. These include the purchase or construction of: 

  • Existing buildings or land 

  • New facilities 

  • Long-term machinery and equipment

Or the improvement or modernization of: 

  • Land, streets, utilities, parking lots and landscaping 

  • Existing facilities 

A 504 loan  cannot  be used for: 

  • Working capital or inventory 

  • Consolidating, repaying or refinancing debt 

  • Speculation or investment in rental real estate

What do I need to apply?

504 loans are available exclusively through Certified Development Companies (CDCs).  Find a CDC  in your area to ensure you are dealing with a qualified lender. CDCs are uniquely qualified to understand 504 loan program regulations, and will help you navigate the lender channels to create your project financing.

Will I Need a Feasibility Study for my SBA 504 Loan? provides feasibility studies for the SBA 504 Loan Program nationwide in a wide array of sectors.

Depending on the project type, if a new start-up, new construction or expansion of an existing business, we are called upon to provide the required SBA Feasibility Study that complies with CDC and SBA requirements.

Ask your CDC loan officer about their requirements. Often we are called after the loan application has been reviewed by the underwriters. You can recommend as your SBA Feasibility Study provider.

We have worked with many of the over 200 CDCs over the years and understand how rigorous their SBA feasibility study requirements are. They tend to focus on the ability of the business to compete in the market.

According to the Small Business Administration (SBA) § 120.160 Loan Conditions, The following requirements are normally required by SBA for all business loans: (a) Personal guarantees. Holders of at least a 20 percent ownership interest generally must guarantee the loan.  


SBA, in its discretion, consulting with the Participating Lender, may require other appropriate individuals to guarantee the loan as well, except SBA will not require personal guarantees from those owning less than 5% ownership.

      (b) Appraisals. SBA may require professional appraisals of the applicant’s and principals’ assets, a survey, or a feasibility study.

      (c) Hazard Insurance. SBA requires hazard insurance on all collateral. (d) Taxes. The applicant may not use any of the proceeds to pay past-due Federal and state payroll taxes. 

SBA Feasibility Study Requirements

  • Executive Summary

  • Economic Feasibility

  • Market Feasibility

  • Technical Feasibility

  • Management Feasibility

Executive Summary

Introduction/Project Overview (Brief general overview of project location, size, etc.); Economic feasibility determination/opinion; Technical feasibility determination/opinion; Market feasibility determination/opinion; Financial feasibility determination/opinion; Management feasibility determination/opinion; Recommendations for implementation, including an overall conclusion as to the business’ chance of success.

Economic Feasibility

Information regarding project site; Availability of trained or trainable labor; Availability of infrastructure, including utilities, and rail, air and road service to the site.  This includes an economic overview nationally, state level, and county level.  Also included is a demographic overview and traffic counts and other pertaining items related to the business type. 

Market Feasibility

This is a critical part of an SBA Feasibility Study.  SBA 504 and 7(a) Loan underwriters use this section to determine your market share, and how well your enterprise can be accepted into the market.  Generally, they ask we follow the USDA guide for this section as follows:

1.Information on the sales organization and management; Nature and extent of market and market area; Marketing plans for sale of projected output - principal products and byproducts; Extent of competition including other similar facilities in the market area; Commitments from customers or brokers - principal products and byproducts. Adequacy of raw materials and supplies. Projected total supply from members and non-members. Projected competitive demand for raw materials. Procurement plan and projected procurement costs. Form of commitment of raw materials (marketing agreements, etc.).

Each project is different, thereby we modify this section to accommodate a complete analysis of the market and competitors.  Items included in the competitive analysis include information from Dun & Bradstreet, Moody's Analytics and ArcGIS Business Analyst to estimate the market area capacity for your venture.

Technical Feasibility

Again, we as asked to use the USDA Guide RD Instruction 4279-B for this section as follows:

Suitability of the selected site for the intended use including an environmental impact analysis. Report must be based upon verifiable data and contain sufficient information and analysis so that a determination may be made on the technical feasibility of achieving the levels of income or production that are projected in the financial statements. Report must also identify any constraints or limitations in these financial projections and any other facility or design-related factors which might affect the success of the enterprise.

Report must also identify and estimate project operation and development costs and specify the level of accuracy of these estimates and the assumptions on which these estimates have been based. Project engineer or architect may be considered an independent party provided neither the principals of the firm nor any individual of the firm who participates in the technical feasibility report has a financial interest in the project and provided further that no other individual or firm with the expertise necessary to make such a determination is reasonably available to perform the function. Commercial Replication. Risks Related: Construction, Production Regulation and Governmental Action.

Financial Feasibility

In this part of the SBA Feasibility Study, all assumptions related to the development of the pro forma statement are identified and explained.  These items are market driven.  We located financial statements through various sources that are used by SBA Loan underwriters whereas industry financial ratios are provided. 

If your business is an expansion of your existing business, we gather your balance sheet and financial statements as historical support for future plans as well.  

Based on information gathered in the process of the Economic, Market and Technical Feasibility sections of the study, we can then identify and use market indications to develop the pro forma statement such as prices, rents, vacancies, usage rates, etc.  Operating cost are also compared with your historical figures, or market indications from sources that evaluate hundreds of actual financial statements.  

Then a 10-year pro forma statement is developed.  In the SBA Feasibility Study, a monthly pro forma is presented based on seasonality, if any for your business.  The EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) is then evaluated by way of financial analysis including:

SBA Feasibility Study Financial Analysis:

  • Pro forma (10 years)

  • Discounted Cash Flow Analysis (DCF)

  • Structure of the Assets and Liabilities   

  • Net Assets (Net Worth)   

  • Financial Sustainability Analysis      

  • Key ratios of the company's financial sustainability      

  • Working capital analysis   

  • Liquidity Analysis Financial Performance   

  • Overview of the Financial Results   

  • Profitability Ratios   

  • Analysis of the Business Activity (Turnover Ratios)   

  • Labor productivity

  • Key Ratios Summary   

  • Rating of the Financial Position and Financial Performance  

  • Bankruptcy Test  

  • Calculation of the Final Rating of the Financial Condition

Management Feasibility

This section includes a discussion concerning the adequacy of management (experience, training, and education of management). Discuss continuity of management (is there a continuity of management plan and is there depth of management?). Evidence that continuity and adequacy of management has been evaluated and documented as being satisfactory. Discuss motivation and character of management. Risks Related to: Applicant as a company (i.e. development-stage) Conflicts of interest or appearances thereof.

SBA Feasibility Study and Business Plan Package

The SBA often requires both an SBA Feasibility Study and SBA Business Plan in the required SBA format.  We offer a special price for both items prepared together.  Ask us how.

Feel free to call us directly at 1-800-498-6850, or book a meeting for more info.

Publisher Details: SBA Feasibility Study Consultants: USDA Feasibility Study Consultants: Feasibility-Study.com

Unlock the potential of your business with, the ultimate destination for comprehensive feasibility studies, empowering you to make informed decisions, maximize profitability, and shape a prosperous future. Join us in revolutionizing your business strategy today!


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