Dinn, Hochman & Potter, LLC

What can the funds from a 504 loan be used for?

Commercial real estate projects are multi-faceted and extremely complex. And financing is typically the most important aspect of successfully bringing a project to fruition. After all, you won't be able to even break ground with the first shovel without there being money to pay for land, construction, fees, taxes and all other related costs. As such, you will likely be seeking to secure a sizable business loan before proceeding.

If you are considering becoming involved in a commercial real estate project, you might want to read our post that covered Certified Development Company/504 loans. These are government-issued loans that can be used to pay for a number of things pertaining to a project, including:

  • Constructing new facilities or converting, renovating, or modernizing existing facilities.
  • Purchasing land and existing buildings.
  • Purchasing equipment and machinery for long-term use.
  • Purchasing improvements for such things as landscaping, grading, utilities and parking lots.

However, there are limitations. You cannot use money from a 504 loan for investing or speculating in real estate. Nor can you use the loan money for the refinancing, consolidating or repaying debt. Also, the money cannot be used for inventory or working capital.

So while receiving a 504 loan can provide an excellent start for your commercial real estate project, it is only one step in a series of financial transactions with which you will be contending. With so many moving parts and such a high number of people involved, you will likely need the aid of an experienced law firm that offers tax, contract and business law services.

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Cleveland, OH 44124

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