Finance term
SBA 504 Loan
Also known as: 504 loan, CDC 504
Definition
The SBA 504 Loan Program is the U.S. Small Business Administration's fixed-asset financing program — long-term, fixed-rate loans up to $5 million per loan for purchasing commercial real estate or heavy equipment, structured through Certified Development Companies (CDCs).
Detailed explanation
SBA 504 loans finance major fixed assets — commercial real estate (purchase, refinance, expansion) and large equipment with useful life of 10+ years. The 504 structure is unique: a private lender (bank) finances 50% of the project, a CDC (Certified Development Company) finances 40% via an SBA-guaranteed debenture, and the borrower puts 10% down. The bank takes first lien position; the CDC takes second.
The key advantage of 504 is long-term fixed-rate financing — 20- or 25-year fixed rates on the CDC portion. Compared to bank-only financing on commercial real estate (typically 5-7 year terms with balloon payments), 504 eliminates refinance risk.
Per-loan max is $5 million ($5.5 million for manufacturers, public-policy goal projects). Effective July 4, 2026, the cumulative 7(a) + 504 cap doubles from $5M to $10M with decoupling. Small manufacturers retain the ability to access multiple 504 loans per distinct project.
The SBA's 504 loan program page (https://www.sba.gov/funding-programs/loans/504-loans) documents eligible uses, project size requirements, and how to find a CDC. The SBA SOP 50 10 (https://www.sba.gov/document/sop-50-10-lender-development-company-loan-programs) governs lender and CDC underwriting standards.
Common questions
The most-asked questions about SBA 504 Loan — answered straightforwardly.
What can SBA 504 finance? +
Owner-occupied commercial real estate (purchase, construction, renovation, refinance), heavy equipment with 10+ year useful life, and certain energy-efficiency improvements. Working capital, inventory, and small equipment are NOT 504-eligible — those route to 7(a).
How much down payment is required for SBA 504? +
Typically 10% down. Special-use real estate (single-purpose facilities like gas stations, car washes, restaurants) often requires 15% down. New businesses or businesses under 2 years sometimes require 15-20% down.
Further reading
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