Can land you already own count toward a 504 down payment?
Short answer
Yes, if the land is part of the project. Land bought less than 2 years before the application counts at cost. Land held 2 years or more counts at appraised fair market value (13 CFR § 120.911; SOP 50 10 8.1, Sec. C, Ch. 1, Para. C.1).
Yes. Your contribution can be land that is part of the project, including buildings and site improvements you already acquired (13 CFR § 120.911). The SOP also counts your equity in land and buildings you own, if they are part of the project (SOP 50 10 8.1, Sec. C, Ch. 1, Para. E.1.e; Para. E begins p. 242).
How the land is valued
- Bought less than 2 years before the application: valued at cost.
- Held 2 years or more: valued at fair market value, set by an independent appraisal.
Source: Sec. C, Ch. 1, Para. C.1 (p. 226).
The appraisal trigger
If you contribute equity in land owned 2 years or more, an appraisal is required even when the property is worth $500,000 or less. It must go to SBA with the application (Para. E.2.b).
How much you must contribute
You must contribute at least 10% of the financing, 15% for a new business or limited or special purpose property, and 20% for both. Source: Para. B (p. 221). The percentage is of project cost, excluding administrative costs (13 CFR § 120.910).
Equipment and refinances
Your equity in equipment can count in a 504 refinance if the debt originally bought that specific equipment. Equity in land or a building being refinanced can count as well (Para. E.1.e; Para. C.11).
Other sources
The contribution can also be cash, or property SBA accepts that you bought with cash (13 CFR § 120.910). It can be borrowed if it is subordinate to the third party loan and the debenture (Para. E.1.e; 13 CFR § 120.912).
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