November 2018
Ask The Experts
SBA 504 Q&A: EPCs and OCs

Q: Can I use an existing real estate holding company for my Small Business Administration (SBA) 504 loan project?

Ask the SBA 504 Loan ExpertsA: The answer is, it depends on the holding company.

Per SOP 50 10 5 (J), to be eligible for a 504 loan project, an EPC (or eligible passive company, i.e. real estate holding company) must be passive and can only own property leased to the OC (operating company) for the OC operations at the current location, and/or other locations of the exact same OC.  If the EPC owns other property, whether leased to an affiliate of the OC or not, or if the EPC conducts its own operating activities, it is not eligible to be an EPC for a 504 loan project.

Effectively, the EPC cannot hold real estate for any entity other than the OC, additionally, the EPC cannot hold ownership interest (or investments) in other entities as that would be considered “its own operating activities.”

This limitation on what assets can be held by the EPC has been put in place by the SBA due to potential litigation that would impact the OC if other real estate, unrelated to the OC, were allowed to be held by the EPC.

If you have a question you’d like our SBA 504 loan experts to answer, email us at or call 850.681.3601 or toll-free at 800.504.LOAN.