A business buying a building may need room for future expansion before it can use the entire property. How much space it must occupy—and how much it can lease to others—can affect its financing options.
A House proposal would revise those requirements within the Small Business Administration’s 504 financing program.
H.R. 10375, titled the 504 Modernization and Small Manufacturer Enhancement Act of 2026, appears in a reported House version dated October 9. The provisions described here are proposals, not instructions borrowers can currently rely on.
What 504 financing supports
The SBA describes 504 loans as long-term, fixed-rate financing for major business assets. Eligible uses include buildings, land, and qualifying machinery.
Certified Development Companies work with participating lenders to arrange financing. Eligibility includes the ability to repay; the program does not provide unrestricted funding for every business expense. The program excludes working capital, inventory, and speculative rental-property investment.
What the bill would change
The reported text would allow a business acquiring an existing building to occupy at least half and permanently lease up to half. A separate exception would permit greater leasing under additional conditions and oversight.
For newly constructed facilities, qualifying small manufacturers would face a lower initial occupancy threshold but would still be subject to later expansion requirements.
The proposal also addresses loan closings. It would authorize designated accredited development companies to make specified adjustments, including certain corrections and project-cost reallocations.
Additional provisions concern workforce training, disaster-area revitalization, and expansion by businesses with ten or fewer employees.
Why occupancy rules matter
For an owner considering a property larger than the business immediately needs, leasing unused space could influence the project’s cash flow. However, that is a potential business consequence—not a forecast of savings or evidence that a particular project would qualify.
A useful financing comparison would examine the purchase price, the company’s space needs, tenant income assumptions, and its ability to carry the property when space is vacant.
The proposed closing provisions raise a separate question: whether allowing specified adjustments would reduce administrative delays. The bill text alone does not establish how much time borrowers would save.
What owners should watch
The next reporting questions are whether Congress changes or advances the measure, what provisions survive, and how any enacted changes would be implemented.
Owners evaluating a purchase now should have their Certified Development Company assess the project under applicable requirements. A proposed change can inform future planning, but it cannot establish present eligibility or guarantee approval.
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