Ask The Experts
SBA 504 Q&A: EPC Business Activity
Q: Under a Small Business Administration (SBA) 504 loan, can an eligible passive company (EPC) be involved in other business activities outside of holding real estate?
A: No. Per SOP 50 10 5 (K), effective April 1, 2019, “An EPC (excluding a trust) may not engage in any business activity other than leasing the property to the operating company (OC).”
This includes holding other property for investment, development, and leasing to other parties. Any property not leased to the OC would make the EPC ineligible unless they completely divest/transfer of the other property or lease all the property to the OC.
An entity that serves as an EPC for a new 504 loan cannot have any business activity other than leasing property to the applicant OC for the OC’s own business use.
This EPC entity can lease multiple properties to the same OC, but if it leases property to any other business (even an affiliate) or does any other business, it cannot be an EPC on the new 504 project.
If you have a question for our SBA 504 loan experts, email us at info@FloridaFirst.com or call 850.681.3601 or toll-free at 800.504.LOAN.