The Program

The SBA 504 Loan Program is an economic development program designed to facilitate capital investment and job creation and/or retention on a local level. Through certified development companies such as Black Hawk Economic Development, Inc. (BHED), in conjunction with the U.S. Small. Business Administration (SBA), reasonable fixed interest rate financing is available for qualifying small business projects.

SBA 504 Service Area

  At present, Black Hawk Economic Development Inc.'s SBA 504 program service area includes the above shaded counties in the State of Iowa.


Black Hawk Economic Development, Inc.'s Primary SBA 504 program service area includes Allamakee, Black Hawk, Bremer, Buchanan, Butler, Chickasaw, Clayton, Fayette, Grundy, Howard, and Winneshiek Counties in the State of Iowa. Other counties are serviced on a case by case basis.

Eligible Businesses

To be eligible for the SBA 504 Loan Program, a business must meet the SBA Program definition of a small business including but not limited to:
  • For profit
  • Independently owned and operated
  • Not dominant in its field of operation
  • Tangible net worth of less than $15 million
  • After federal income tax net income for the two years immediately preceding the application cannot exceed $5 million per year on average

Local Administration

The SBA 504 Loan Program is administered on a local level by Black Hawk Economic Development, Inc. As such, the organization markets the program, processes applications, and provides loan servicing functions on a local level under the direction of SBA.

General Requirements

A loan applicant must:
  • Be of good character and/or good standing
  • Demonstrate ability to operate the business successfully
  • Possess adequate capital to operate the business on a successful basis
  • Demonstrate sufficient past and/or future earnings to repay the loan
  • Provide adequate business collateral to assure loan repayment

Use of Funds

The SBA 504 Loan Program is a fixed asset finance program. As such eligible use of funds include the acquisition of fixed assets only and which meet minimum program useful life standards. The fixed assets must be utilized in the ordinary course of the business.

Eligible uses of funds:
  • Acquisition of land or building
  • Building construction/improvement
  • Purchase of machinery and equipment with a minimum useful life of ten (10) years (with exceptions)
  • Other direct eligible costs associated with a project (e.g. appraisal, construction interest)
  • Refinance of existing debt (limitations apply)

Ineligible uses of funds:
  • Non fixed assets
  • Working capital
  • Machinery and equipment with a minimum useful life of less than ten (10) years
  • Accounts receivable/inventory, etc.
  • Passive holding of real estate i.e. apartments
  • Speculative purposes

Project Review

SBA 504 Program applications are first reviewed on a local level by BHED. SBA concurrence or approval is also required. Program guidelines:
  • Number of jobs to be created/retained as a result of the project. Project must generally meet the threshold of one job created/ retained per $65,000 of Program funding.
  • Amount of SBA 504 Program assistance requested. The maximum SBA participation or exposure is typically limited to $1,500,000 ($2 million for projects that meet public policy goals).
  • Typical funding structure of 50-40-10
  • Under the Program, no more than 50% of the project financing can be federal in nature.
  • Other terms and conditions apply.

The Funding Process

The SBA 504 Loan Program is typically thought of as "take out" financing. Once an application is approved by BHED (with the concurrence of SBA), a loan commitment or authorization is issued disclosing the terms and conditions for program participation. The bank then advances against the authorization with construction or interim financing for the project. Upon completion of the project, BHED proceeds with the loan closing followed by debenture funding 4 to 6 weeks later.


Program loans must be adequately collateralized to assure repayment of the loan. The collateral is typically limited to the project assets and the personal guaranty of owners having greater than 20% ownership. Additional collateral may be required if the project assets are not sufficient.

Terms And Interest Rates

SBA 504 Loan Program loans are for ten or twenty year terms (only). In order to obtain the most favorable bond rate, a declining prepayment penalty applies during the first half term of the loan. The loan interest rate is not set or known until the debenture or bond is priced following completion of the project and the loan is closed. Once priced, the debenture interest rate is fixed for the term of the loan. The interest rate most often quoted is in terms of the ten or twenty year effective rate, which includes the various on going fees.

Application Process

Develop a Business Plan, to include
  • Summary of a sound business project
  • Organizational structure/management
  • Marketing plan
  • Schedule of project cost(s)
  • Proforma financial statements (i.e. Balance Sheets, Income Statements, and Cash Flow Statements)
  • Historical financial statements, to include tax returns (3 most recent years; personal and business).

Commercial Lender Review
All projects are initially reviewed by a commercial lender to determine the financial institution's participation. If applicable, the lender may then refer the applicant to BHED for SBA 504 Program assistance in the project

Complete the Financial Assistance Application
If your business and/or project is eligible, and a financial gap is identified, contact us at:

Black Hawk Economic Development, Inc.
1001 Peoples Square
Waterloo, Iowa 50702
Phone: (319) 235-2960
Fax: (319) 235-9171

Click here for a copy of the 504 Application Checklist.

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