SECTION 504 loan proceeds are used to finance the acquisition of fixed assets with a useful economic life of ten years or more. Economic life is the estimated useful life of the asset, not the depreciable life which, for tax purposes, is usually less.

Projects may include one or more of the following:

• Land acquisition and site improvements
• New construction
• Building acquisition or renovation
• Leasehold improvements
• Machinery and equipment
• Soft costs*

* Eligible soft costs include architectural and legal fees, environmental studies, appraisals, and interest and fees on the construction and/or interim bank loan.

SECTION 504 funds may be used to purchase a building (including new construction), make exterior renovations and interior improvements; to upgrade HVAC, electrical, and plumbing systems; and to acquire machinery and equipment.   "Finish" work to space being leased to unrelated third parties cannot be included in the SECTION 504 financing package.

User of Asset

The asset being financed must be used by the operating company.  Real estate must be owner-occupied, as defined by the SECTION 504 Loan Program.  There are two definitions of owner-occupancy, one for existing buildings and another for new construction.

New Construction

Bay Colony also provides loans to construct new buildings.

Ineligible costs

Working capital, vehicles, and any commitment (except as listed above), origination, application or finder's fees  cannot be included in project costs.  Generally, existing loans cannot be refinanced with SECTION 504 loan proceeds.