SBA 504 Loans
Fixed-rate, long-term financing for commercial real estate and heavy equipment with only 10% down
What is an SBA 504 Loan?
SBA 504 loans provide long-term, fixed-rate financing for major fixed assets like commercial real estate and heavy equipment. The program involves a partnership between a Certified Development Company (CDC), a conventional lender, and the borrower.
Simple Translation:
If you need to buy a building, construct a new facility, or purchase expensive machinery, the 504 program lets you do it with only 10% down instead of 20-30%. The SBA and a nonprofit CDC fund 40% of the project at a fixed rate, while a bank covers 50%. You get the stability of fixed payments and preserve working capital for operations.
Unlike SBA 7(a) loans that can be used for almost any business purpose, 504 loans are specifically designed for major fixed asset purchases—they cannot be used for working capital, inventory, or debt refinancing (with limited exceptions for debt consolidation).
The 504 Loan Structure
50%
Bank Loan
Senior lien position, conventional bank rates
40%
CDC/SBA Loan
Fixed rate, long-term, junior lien
10%
Your Equity
Down payment (may increase for startups)
Key Features
Loan Amount
Up to $5,500,000
CDC/SBA portion. Total project cost can exceed $10 million with bank financing.
Repayment Terms
10-25 Years
10 years for equipment; 20-25 years for real estate. Fully amortizing.
Interest Rate
Fixed Rate on CDC portion
Rates tied to 5- and 10-year Treasury rates
Locked in at funding—no rate surprises
Eligible Uses
• Commercial Real Estate Purchase
• New Construction or Renovation
• Heavy Machinery & Equipment
• Land & Soft Costs
Terms and amounts subject to lender approval and SBA eligibility requirements. Some projects may require 15-20% equity.
How 504 Compares to Other Options
See how SBA 504 loans stack up against SBA 7(a) and conventional commercial loans for real estate and equipment.
| Feature | SBA 504 | SBA 7(a) | Conventional |
|---|---|---|---|
| Down Payment | 10% (typically) | 10-20% | 20-30% |
| Interest Rate (CDC Portion) | Fixed Rate | Variable (typically) | Variable or Fixed |
| Maximum Term | Up to 25 Years | Up to 25 Years | 5-15 Years (typical) |
| Working Capital | No | Yes | Yes |
| Real Estate & Equipment | Yes (Primary Purpose) | Yes | Yes |
| Balloon Payment | No (Fully Amortizing) | No | Often Yes |
| Prepayment Penalty | Yes (decreasing) | Varies | Often Yes |
Who Qualifies?
Basic Requirements
For-Profit U.S. Business
Must operate as a for-profit business in the United States
Net Worth Under $20 Million
Business tangible net worth must not exceed $20 million
Average Net Income Under $6.5 Million
Average net income (after taxes) for preceding two years must not exceed $6.5 million
Job Creation or Public Policy Goal
Must create or retain jobs, or meet another public policy goal (energy efficiency, manufacturing, etc.)
Owner-Occupied Property
For real estate, business must occupy at least 51% of existing building (60% for new construction)
Manufacturing Bonus: Fee Waivers in FY2026
Manufacturers in NAICS codes 31-33 receive complete SBA guarantee fee waivers on all 504 loans in Fiscal Year 2026. This can save tens of thousands of dollars in upfront costs on large real estate and equipment purchases.
Why Manufacturers Choose 504 Loans
Preserve Working Capital with 10% Down
Instead of tying up 20-30% of a project cost in a down payment, 504 loans typically require only 10%. On a $2 million facility, that's $200K-$400K you can keep working in your business.
Lock In Fixed Rates
The CDC/SBA portion (40% of the project) carries a fixed rate locked at funding. In a rising rate environment, this provides long-term cost certainty and protection against rate increases.
No Balloon Payments
504 loans are fully amortizing—no surprise refinancing requirement at year 5 or 10. Your payment stays the same until the loan is paid off, making budgeting straightforward.
Finance Major Equipment Purchases
Unlike many programs that focus only on real estate, 504 loans can finance heavy machinery and equipment with 10-year fixed-rate terms. Ideal for CNC machines, production lines, and other major capital equipment.
How the Process Works
Initial Consultation (Free)
We evaluate your project and determine if 504 is the right fit. We'll discuss the property or equipment, your down payment capacity, and timeline.
Bank & CDC Coordination
We coordinate with both a conventional lender (for the 50% first position) and a Certified Development Company (for the 40% SBA-guaranteed portion).
SBA Approval & Debenture Sale
The CDC submits the application to SBA. After approval, the CDC portion is funded through a debenture sale, which sets your fixed interest rate.
Closing & Funding
The bank loan typically closes first, with the CDC loan closing shortly after. You receive funds and can proceed with your real estate purchase or equipment acquisition.
Explore Other SBA Programs
SBA MARC Loans
Exclusive working capital program for manufacturers (NAICS 31-33) with up to $5M and 10-year terms.
Learn More →SBA 7(a) Loans
The SBA's most versatile loan program for working capital, equipment, real estate, and acquisitions.
Learn More →Expert Insights
In-depth articles on SBA financing strategies, eligibility tips, and manufacturing growth.
Browse Articles →Ready to Explore SBA 504 Financing?
Let's discuss if an SBA 504 loan is right for your real estate or equipment project. Free consultation, no upfront costs.