SBA 504 Loan Guide (2025): Rates, Structure & How to Apply
The SBA 504 loan program is one of the most powerful financing tools available to small businesses acquiring commercial real estate or major equipment. With below-market fixed interest rates and only a 10% down payment, it enables business owners to preserve working capital while building long-term equity.
How the 50/40/10 Structure Works
Unlike conventional loans, 504 financing involves three parties:
- 50% — Conventional Lender (Bank/Credit Union): Provides a first mortgage at market rates
- 40% — Certified Development Company (CDC): Issues a second mortgage backed by an SBA-guaranteed debenture at a fixed below-market rate
- 10% — Borrower: Down payment (15% for startups or single-purpose buildings)
Eligible Uses for SBA 504 Funds
- Purchase of existing buildings (must be at least 51% owner-occupied)
- Construction of new facilities
- Renovation or leasehold improvements
- Purchase of long-life machinery and equipment (10-year useful life minimum)
- Refinancing of conventional debt under certain conditions
Loan Amounts and Limits
- Standard maximum: $5.5 million in SBA debenture (CDC portion)
- Energy-efficient projects: up to $5.5 million per project, multiple projects allowed
- Small manufacturers: up to $5.5 million
- No cap on the conventional lender's 50% portion
Interest Rates and Terms
The CDC portion of a 504 loan carries a fixed interest rate set monthly, tied to the 10-year Treasury note for 20-year loans and the 5-year Treasury for 10-year loans. This rate is locked at closing and never adjusts — a major advantage over conventional commercial real estate loans.
Term options: 10, 20, or 25 years for real estate; 10 years for equipment.
SBA 504 vs. SBA 7(a): Which is Right for You?
| Feature | SBA 504 | SBA 7(a) |
|---|---|---|
| Max Loan | $5.5M (CDC portion) | $5M total |
| Rates | Fixed, below-market | Variable or fixed |
| Use | Fixed assets only | Working capital + assets |
| Down Payment | 10% | 10–30% |
| Best For | Real estate, large equipment | General business needs |
How to Apply for an SBA 504 Loan
- Find a CDC: Locate a Certified Development Company in your state through the SBA's website or our lender finder
- Find a conventional lender: Your CDC will often have banking partners, or use our ZIP code search
- Gather documents: 3 years business tax returns, personal financial statement, business plan, and property information
- Submit applications: Applications go to both the bank and the CDC simultaneously
- SBA review: The CDC submits the debenture to the SBA for guarantee approval
- Closing: Typically 30–45 days after SBA approval
Frequently Asked Questions
SBA 504 loans follow a 50/40/10 structure: a conventional lender (bank) provides 50% of the project cost, a Certified Development Company (CDC) provides 40% backed by SBA debentures, and the borrower contributes 10% as a down payment.
SBA 504 rates are pegged to 10-year and 20-year U.S. Treasury yields plus a small spread. Rates are fixed for the life of the loan. Check the SBA's monthly 504 debenture rate announcements for current figures.
CDCs are SBA-regulated nonprofit organizations certified to deliver the SBA 504 program. They work with banks to package and close 504 loans. There are approximately 200 CDCs operating across the US.
No. SBA 504 loans are strictly for fixed assets: owner-occupied commercial real estate, construction, major equipment, and leasehold improvements. For working capital, the SBA 7(a) program is appropriate.
View the full SBA loan program comparison or find a CDC lender near you.