Can I Use SBA 504 Loan to Buy Equipment in Florida?

Yes, you can use an SBA 504 loan to finance equipment purchases in Florida. This is one of the program's lesser-known applications, and many Florida business owners miss out because they assume the 504 program only covers real estate.

The SBA 504 loan program allows businesses to finance heavy machinery and equipment either as a standalone project or combined with a real estate purchase. For equipment-only projects, the machinery must have a useful life of at least 10 years and be fixed in place (not rolling stock like trucks or vehicles).

What Equipment Qualifies for SBA 504 Financing?

The SBA requires equipment financed through the 504 program to meet specific criteria. The machinery must have a remaining useful life of at least 10 years and must be considered "fixed" rather than mobile.

Examples of eligible equipment include:

• Manufacturing machinery and production equipment
• CNC machines and precision equipment
• Printing presses and commercial printing equipment
• Commercial laundry equipment
• Food processing machinery
• Medical and dental equipment
• Laboratory and technical instruments
• Commercial kitchen equipment (large-scale, fixed installations)
• Renewable energy generation equipment
• Construction equipment integral to business operations
• Heavy loaders and forklifts
• AI-supported equipment for manufacturing

Equipment that does not qualify includes automobiles, trucks, airplanes, and other rolling stock. Short-term equipment, standard furniture, and fixtures generally don't qualify either, unless they represent a minor portion (less than 10%) of a larger project.

How SBA 504 Equipment Financing Works

The financing structure for equipment follows the same three-party model as real estate projects:

Bank or credit union: Provides 50% of the project cost, secured by a first lien position on the equipment.

CDC/SBA: Provides up to 40% of the project cost through a Certified Development Company, backed by an SBA-guaranteed debenture.

Borrower: Contributes 10% as a down payment (or 15% for startups operating less than two years).

For a $500,000 equipment purchase, this means putting down $50,000 rather than the $100,000 or more that conventional financing typically requires. The lower equity requirement preserves working capital for operations, inventory, and other business needs.

Loan Terms for Equipment Projects

Equipment loans through the 504 program offer several term options based on the useful life of the asset:

• 10-year term for equipment with 10+ year useful life
• 20-year term for equipment with 20+ year useful life
• 25-year term available in some cases for long-life industrial equipment

The interest rate on the CDC/SBA portion is fixed for the entire loan term. Current 10-year equipment rates are around 6.35%, though rates adjust monthly based on Treasury bond yields. The bank's portion (50%) will carry market rates, which may be fixed or variable depending on your lender relationship.

Unlike conventional equipment financing, 504 loans have no balloon payments. The loan fully amortizes over its term, so you know exactly what your payment will be each month for the life of the loan.

What Costs Can Be Included?

The 504 program allows you to finance more than just the purchase price of the equipment. Eligible project costs include:

• Purchase price of new or used equipment
• Transportation and delivery costs
• Dismantling and removal of existing equipment
• Installation costs
• Professional fees directly related to the project
• Soft costs associated with the acquisition

This means the total financed amount can reflect the true cost of getting equipment operational, not just the sticker price.

SBA 504 vs. Conventional Equipment Financing

Conventional equipment loans often come with less favorable terms. Banks typically require 20% or more down for equipment purchases, offer shorter terms (3-7 years is common), and may include balloon payments that create refinancing risk.

Here's how the numbers compare on a $500,000 equipment purchase:

Conventional financing:

• Down payment: $100,000 (20%)
• Term: 5-7 years typical
• Interest: Variable or short-term fixed
• Balloon payment possible

SBA 504 financing:

• Down payment: $50,000 (10%)
• Term: 10-20 years
• Interest: Fixed on CDC portion
• No balloon payment

The lower down payment alone saves $50,000 in upfront capital. The longer term reduces monthly payments, improving cash flow during the equipment's productive years. And the fixed rate on the CDC portion protects against interest rate increases.

Eligibility Requirements for Florida Businesses

To qualify for SBA 504 equipment financing, your business must meet standard program requirements:

Business qualifications:

• Operate as a for-profit company in the United States
• Tangible net worth under $20 million
• Average net income under $6.5 million after federal taxes (based on the two years preceding your application)
• Meet SBA size standards for your industry

Owner qualifications:

• U.S. citizen or permanent resident with green card
• Good character (no recent defaults on federal loans)
• Able to demonstrate management expertise

Project qualifications:

• Equipment must have minimum 10-year useful life
• Must be fixed machinery (no rolling stock)
• Must promote business growth or job creation

Certain business types are ineligible regardless of equipment needs, including nonprofits, lending institutions, insurance companies, gambling businesses, and speculative ventures.

How to Prove Equipment Useful Life

The 10-year useful life requirement is critical for equipment-only 504 projects. You'll need documentation showing your equipment meets this threshold.

Acceptable documentation includes:

• Manufacturer's declaration of useful life
• Equipment appraisal from a qualified appraiser
• Industry standards documentation
• IRS depreciation schedules for comparable equipment

For new equipment, a manufacturer's statement is usually sufficient. For used equipment, an appraisal may be required to verify remaining useful life exceeds 10 years.

Combining Equipment with Real Estate

Many Florida businesses finance equipment alongside a real estate purchase. This is common when buying a manufacturing facility, medical office, or any property where specialized equipment is integral to operations.

When equipment is part of a larger real estate project, the useful life requirements may be more flexible because the loan term can be based on the real estate component. The combined project can qualify for up to 25-year terms, spreading equipment costs over a longer period.

This approach also simplifies financing by consolidating everything into a single loan structure rather than managing separate equipment and real estate loans.

Industries That Benefit Most

Certain Florida industries see particularly strong value from 504 equipment financing:

Manufacturing: CNC machines, production lines, assembly equipment, and industrial machinery often have 15-20 year useful lives and carry price tags that make the low down payment especially valuable.

Healthcare and dental: Medical imaging equipment, dental chairs and systems, and laboratory equipment qualify when they meet the useful life requirement.

Food processing and distribution: Commercial food processing equipment, cold storage systems, and large-scale kitchen installations are common 504 equipment projects.

Printing and publishing: Offset presses, digital printing systems, and bindery equipment are specifically mentioned in SBA guidance as eligible.

Commercial laundry: Industrial washers, dryers, and finishing equipment for laundromats or hospitality businesses.

Construction: Heavy equipment that remains at a fixed location and is integral to ongoing operations (not project-specific equipment moved from site to site).

The Application Process

Equipment financing through the 504 program follows the same general process as real estate projects:

1. Initial consultation: Meet with a CDC Business Development Officer to discuss your equipment needs and determine eligibility.
2. Application and documentation: Submit financial statements, tax returns, business plan, and equipment specifications including useful life documentation.
3. Underwriting: The CDC credit team reviews your application and submits to the SBA for approval.
4. SBA approval: Target timeframe is approximately 14 days from submission.
5. Closing: Typically 2-3 weeks from SBA approval.
6. Funding: For equipment projects without construction, funding generally occurs within 45 days of closing.

The total timeline from application to funding typically runs 60-90 days, which is longer than some conventional equipment financing but comes with significantly better terms.

What 504 Loans Cannot Finance

Understanding what the 504 program excludes helps set realistic expectations:

• Working capital
• Inventory purchases
• Vehicles and rolling stock (trucks, vans, cars, airplanes)
• Construction equipment that moves from project to project
• Short-term equipment with less than 10-year useful life
• Standard office furniture and fixtures (unless minor portion of larger project)

If your equipment needs don't fit the 504 program, SBA 7(a) loans offer more flexibility for shorter-lived equipment and can include working capital in the same loan.

Getting Started

If you're a Florida business owner considering a major equipment purchase, the SBA 504 program deserves serious evaluation. The combination of low down payment, fixed rates, and long terms makes it one of the most cost-effective ways to acquire heavy machinery and production equipment.

The key questions to answer are whether your equipment has a 10-year useful life and whether your business meets SBA eligibility requirements. A CDC can help you evaluate both questions and determine if the 504 program makes sense for your specific situation.

Have questions about financing equipment through the SBA 504 program? Contact FBDC at (813) 348-0660 or info@fbdc.net to speak with a Business Development Officer about your project