Overview

The SBA 504 loan program pairs private lenders with Certified Development Companies (CDCs) to provide financing for commercial real estate and large equipment purchases. First Interstate BancSystem participates in this program to deliver a structured, long-term solution for businesses seeking to buy, build or improve owner-occupied property and acquire heavy machinery. The SBA-backed component offers competitive, fixed-rate financing while the bank portion supports flexible project structuring, enabling lower down payments and longer amortization than many conventional loans.

Key Features

• Purpose: Purchase, construct, renovate, or expand owner-occupied commercial real estate and finance long-term machinery and equipment.
• Typical structure: Combination of a senior loan from a bank and a subordinate loan backed by the SBA through a CDC, with a small borrower down payment.
• Long-term amortization: Terms commonly extend 10, 20 or 25 years, reducing monthly cash flow pressure.
• Fixed-rate financing: The CDC/SBA portion generally carries a fixed rate, providing interest rate predictability for the long term.
• Lower down payment: Often requires a smaller initial equity injection compared with conventional commercial mortgages.

Benefits for Your Business

• Preserve working capital: Lower down payments and extended terms help preserve cash for operations, inventory and growth.
• Predictable payments: Fixed-rate components reduce exposure to rising interest rates.
• Asset ownership: Finance owner-occupied property to build equity and control your facility instead of leasing.
• Customizable structure: Combine bank and SBA resources to match the project size and the business’s cash flow profile.
• Community investment: 504 financing often supports expansion projects that create jobs and strengthen local economies.

Who Qualifies?

SBA 504 loans are geared toward for-profit small businesses that meet SBA size standards and demonstrate a need for financing to acquire or improve fixed assets. Typical eligibility considerations include:

• Business status: For-profit and meeting SBA small business size requirements for the industry.
• Owner-occupancy: Property must be occupied by the borrower for business operations — occupancy thresholds are required for new construction versus existing buildings.
• Creditworthiness: Reasonable credit history, management capability, and demonstrated ability to service the debt.
• Purpose: Funds must be used for eligible fixed assets (owner-occupied real estate, long-term machinery/equipment) rather than working capital or inventory.

Common Uses

• Purchase of owner-occupied commercial buildings.
• Construction of new facilities or expansion of existing buildings.
• Renovation, remodeling or modernization of owner-occupied properties.
• Long-term financing of heavy machinery and industrial equipment integral to operations.
• Refinancing certain types of business-held real estate in support of growth or consolidation.

Loan Structure and Typical Terms

While structures can vary by project and borrower circumstances, a classic SBA 504 transaction is composed of three parts: a senior loan from a private lender (such as First Interstate BancSystem), a subordinated SBA-backed debenture through a CDC, and a borrower down payment. This allocation helps reduce the lender’s risk, enabling favorable amortization and predictable rates on the SBA portion. Terms often include extended amortization up to 20 or 25 years for real estate and up to 10 or 20 years for equipment.

Application Process

1. Pre-qualification: Initial review of eligibility, project scope and financing needs.
2. Loan packaging: Gather documentation such as tax returns, financial statements, business plan, project invoices, purchase agreements, and personal financial statements.
3. Credit and underwriting: Bank and CDC evaluate credit, collateral and project feasibility.
4. SBA review and approval: The SBA-backed portion is processed through a CDC and approved per program rules.
5. Closing and funding: Coordinated closing with the bank and CDC, then project funding and construction or acquisition begins.

Documentation Typically Required

• Business and personal tax returns (usually three years).
• Recent financial statements and interim operating statements.
• Business plan and financial projections showing repayment ability.
• Purchase agreements, construction budgets and contractor contracts as applicable.
• Personal financial statements and resumes of principal owners.

Why Choose First Interstate BancSystem for SBA 504 Financing?

First Interstate BancSystem combines local decision-making with experienced SBA lending specialists who understand how to structure projects that align program rules with a borrower’s operational and financial objectives. Whether you are expanding facilities, relocating to a larger space, or modernizing equipment, the bank’s team can guide you through the SBA 504 process, working with a CDC to package the SBA-backed portion and coordinate a smooth closing. The result is financing that supports long-term stability and growth while protecting working capital.

Is an SBA 504 Loan Right for Your Project?

If your business needs long-term, fixed-rate financing for owner-occupied real estate or major equipment purchases and you want to conserve cash while building equity, an SBA 504 loan structure may be an excellent match. Start with a confidential conversation to review your project, eligibility, and financing options so you can make an informed decision and move confidently toward growth.