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Loan type

SBA 504 Loan

Long-term, fixed-rate financing for buildings and heavy equipment.

Run the numbers How to apply

Structure
About 50% bank, up to 40% CDC (SBA-backed), 10% or more from you
SBA debenture
Generally up to $5 million; up to $5.5 million for qualifying manufacturers and energy projects (minimum $25,000)
Term
10 years (equipment); 20 or 25 years (real estate)
Rate
Fixed on the CDC portion; bank portion set by the lender
Fees
0.50% upfront and 0.203% annual on the debenture (FY 2027)
Best for
Owner-occupied buildings, construction and long-life equipment

What it is

The 504 program finances major fixed assets: land, buildings and long-life machinery. It uses a three-party structure. A bank lends about half the project, a Certified Development Company (CDC) backed by the SBA lends up to 40%, and you put in at least 10%. The CDC portion carries a fixed rate for the full term, which is the main reason owners choose 504 over a conventional commercial mortgage.

The trade-off is paperwork and purpose. 504 money cannot be used for working capital or inventory, and the project should create jobs or meet a public-policy goal your CDC can explain.

Where a $2,000,000 project is funded
  • Bank first lien (50%)$1,000,000
  • CDC debenture (40%)$800,000
  • Your equity (10%)$200,000

New businesses and special-purpose property each need 5 more points of equity, which lowers the CDC share.

A good fit if you want

  • Buying or constructing a building you will occupy
  • Heavy equipment with a long useful life
  • Locking in a fixed rate for 20 to 25 years
  • Keeping your down payment lower than a conventional commercial loan

Probably not the right tool if

  • Working capital, inventory or day-to-day expenses
  • Investment real estate you will not use in the business
  • Projects that need to close in a couple of weeks

Typical requirements

  • Owner-occupy at least 51% of an existing building (more for new construction)
  • Eligible small business with a tangible-net-worth and income profile that meets SBA limits
  • Borrower equity of 10%; 5% more for a new business and 5% more for special-purpose property
  • Job creation or another public-policy goal, which your CDC will help document

Run the numbers

These calculators run in your browser and are estimates, not offers. Change any number to see the effect.

How to apply

  1. Talk to a CDCCertified Development Companies package and service 504 loans. Find one through the SBA or our directory.
  2. Line up the bank loanYour bank provides the first lien (about 50%). Some banks work with CDCs often; ask.
  3. Assemble the project budgetLand, building, equipment, soft costs and closing costs. The sources and uses must match.
  4. Submit the packageThe CDC reviews and sends the loan to the SBA for authorization.
  5. CloseThe bank and CDC close together. The CDC portion is funded later through a debenture sale, with the rate fixed at that time.

Need a lender, an SBA district office or a free counselor? Use the national directory.

Common questions

Why is the CDC rate fixed?

The CDC portion is funded through a debenture sold to investors, so its rate is set from market yields at funding and then stays the same.

Can 504 refinance existing debt?

Yes, under specific refinance options. Ask a CDC which apply to your situation.

What happens to the bank loan rate?

The bank sets its own terms. Many banks offer fixed rates for several years and then adjust; compare offers.

Keep reading

Sources

General information, not financial, tax or legal advice. LoansFlow is not a lender and this is not an offer of credit. Program rules, limits, fees and rates change; confirm current terms with your lender and the issuing agency. SBA figures reflect SBA.gov and the fiscal year 2027 fee notices (effective October 1, 2026).