Can a 504 loan finance equipment without real estate?

Yes, because a 504 Project can be one or more long-term fixed assets (SOP 50 10 8.1, App. 3, p. 297). Equipment qualifies without a building attached. It must have a useful life of at least 10 years (Sec. C, Ch. 1, Para. C.2). It must also be at a fixed location (Sec. A, Ch. 3, Para. A.1).

Costs that count

• Purchase price, transportation, dismantling and installation.
• Special moving costs for heavy or highly calibrated equipment you already own, when the move is essential to the project.

Equipment that does not qualify

13 CFR § 120.884 excludes automobiles, trucks and airplanes. It excludes construction equipment, unless it is heavy duty, integral to operations and has at least 10 years of useful life left. Short-term equipment is excluded unless it is essential and a minor part of the project.

Term

Machinery and equipment carry a minimum 504 maturity of 10 years (Sec. C, Ch. 1, Para. D.2). On a mixed project, the asset category with most of the proceeds sets the term.

Used equipment

SBA requires an equipment appraisal when used equipment is bought from someone other than a dealer, or refinanced. A qualified, independent person must inspect it on site. The appraisal must be dated within 12 months before the application (Para. E.2.b).

Shorter-lived equipment

The 10-year test applies only to 504 loans (Sec. A, Ch. 3, Para. A.1). A 7(a) equipment loan can run 10 years, or up to 15 years if the IRS asset class useful life supports it (App. 17, Para. A.2).