Occupancy is not a slogan
Existing building: occupy at least 51%. New construction: occupy at least 60%, with staged lease-up rules. A CIM that calls the plant “owner-used” does not satisfy the CDC. Buying the plant with the business is the real-estate sibling. SBA’s 504 program page is the primary product source (Source: SBA 504).
What 504 will not do
It will not replace 7(a) as the goodwill vehicle. Many buyers pair them: 7(a) for the business, 504 for the building. 7(a) remains a $5 million change-of-ownership box with a 10% injection under SOP 50 10 8 (Source: SBA 7(a)). Do not assume one product swallows the other.
Phase I still follows All Appropriate Inquiries; components generally stale after 180 days (Source: EPA / 40 C.F.R. Part 312). A 504 on a finishing plant does not skip the study.
| 504 piece | Typical role |
|---|---|
| Bank first lien | ~50% of project |
| CDC / SBA debenture | ~40%, capped |
| Borrower injection | ~10%, with exceptions |
| Occupancy test | 51% existing / 60% new |
Who counts as a small manufacturer for the $5.5 million project cap?
Primary NAICS in 31–33 with U.S. production facilities, subject to 13 CFR 120.802 and the current SOP. Confirm with the CDC. This page will not invent a headcount cell.
What a 504 plant project still has to survive
A building that the borrower will actually occupy at the stated percent. A use of proceeds that is real estate or long-life equipment, not a goodwill check. An environmental study that is current. A first-lien bank that will live with the CDC in second position. Affiliates that do not blow the size standard. Special-use buildings that may need more equity.
Sellers who want to keep the real estate and lease it back need to read occupancy before they promise a 504 to the buyer. A lease from the seller can work. It can also fail the occupancy or affiliate tests. Buying the plant with the business is the sibling. This noun is the debenture product.
Do not tell a searcher that “504 will do the whole deal” when half the price is goodwill. That sentence wastes a quarter. Split the stack or change the buyer. The glossary keeps 504 honest about brick versus goodwill.
Isolation
The glossary keeps 504 off the 7(a) H1. The FAQ holds the question. Buy a manufacturing business is the process door. Jason Taken is a business broker. Educational information only.
When the building is the project, book a confidential intro call.
Special-use buildings, extra equity, and affiliates
A finishing plant, a food plant, or a building with pits and cranes can be special-use in a CDC’s eyes. That can mean more than 10% injection. Ask early. Do not discover it after the 7(a) side is already modeled at the minimum. A seller who wants to keep a wing as a personal warehouse can break the 51% / 60% occupancy test. Write the floor plan.
A buyer who already owns three plants can fail the size test even when this file is small. Ask for the affiliate list in week one. A CIM should not treat “504 will do the whole deal” as a stack when half the price is goodwill. Bring who will occupy which square feet and whether goodwill is also in the price. SBA 504 for plants and heavy equipment is the walk-through. The CDC confirms occupancy and the project cap. After the brick noun is straight, a confidential intro call is the conversion path.
What 504 will not finance
It will not replace 7(a) as the goodwill vehicle. Many buyers pair them. Pairing is not a single application. A CIM that says “504 will do the whole deal” when half the price is goodwill wastes a quarter. Phase I still follows All Appropriate Inquiries; components generally stale after 180 days (Source: EPA / 40 C.F.R. Part 312). A 504 on a finishing plant does not skip the study.
How it shows up: occupancy at 51% existing or 60% new, a use of proceeds that is real estate or long-life equipment, and a first-lien bank that will live with the CDC in second position. Published authority is $5 million, or $5.5 million on a qualifying small-manufacturer or energy public-policy project (Source: SBA 504). This page will not invent a headcount cell for the small-manufacturer test. Confirm with the CDC. Buying the plant with the business is the real-estate companion.