What Is an SBA 504 Loan?
The SBA 504 loan program provides long-term, fixed-rate financing for major fixed assets — primarily commercial real estate and heavy equipment. It is structured as two loans: a first lien from a conventional lender (50%) and a second lien from a Certified Development Company (CDC) backed by SBA debentures (up to 40%). The borrower puts 10% down.
The CDC/SBA portion carries a below-market fixed rate tied to Treasury bonds — typically 0.5-1.5% below conventional commercial rates, fixed for 10, 20, or 25 years.
The rate advantage: The SBA 504 debenture rate is set monthly based on Treasury bond rates. On a $2M loan over 25 years, the rate difference vs. conventional can save $200K+ in interest.
Who SBA 504 Loans Are For
- Small business owners purchasing owner-occupied real estate
- Businesses buying heavy equipment or major machinery
- Owners wanting the lowest possible fixed rate on commercial property
- Growing businesses that need to buy instead of lease their space
Key Features
10% borrower down payment (10-20% for startups or special-use). SBA portion up to $5.5M. Fixed rates for 10, 20, or 25 years on the SBA portion. Must be owner-occupied (51%+ existing, 60%+ new). Must create or retain jobs. No working capital — 504 is for fixed assets only.