Quick answer: An SBA 504 loan finances major fixed assets – commercial real estate, construction, or heavy equipment – with about 50% from a bank, up to 40% from an SBA-backed Certified Development Company, and at least 10% down from you.
What Is an SBA 504 Loan?
The SBA 504 loan program provides long-term, fixed-rate financing for major fixed assets: commercial real estate, construction, and heavy equipment. It is built for businesses that want to own their facilities or buy large equipment instead of leasing.How a 504 Loan Is Structured
- A bank or lender typically covers about 50% of the project cost.
- A Certified Development Company (CDC) covers up to 40%, backed by the SBA.
- You contribute at least 10% as a down payment (more for startups or special-use properties).
50% bank or lender
40% CDC, backed by the SBA
10% you, as down payment
Typical Terms
$5MSBA-backed portion ($5.5M for manufacturers)
10-25 yrsrepayment terms, by asset type
Fixedrate on the SBA-backed portion, pegged to Treasuries
- Amount: the SBA-backed portion generally goes up to $5 million, or $5.5 million for small manufacturers and qualifying energy projects
- Repayment: 10, 20, or 25 years depending on the asset
- Rates: fixed on the SBA-backed portion, pegged to U.S. Treasury rates
What You Can Use It For
- Purchasing land or existing buildings
- Constructing or renovating facilities
- Buying long-life machinery and equipment
Who Qualifies
For-profit businesses operating in the U.S. with a tangible net worth under $20 million and average net income under $6.5 million (after federal income taxes) for the two years before applying. The property must be at least 51% owner-occupied for existing buildings, and at least 60% for new construction.How Fast SBA Helps
Fast SBA is not a lender. We connect you with an independent SBA loan advisor who can tell you whether a 504 loan fits your project and help you prepare a complete package. Getting pre-qualified is free.Related reading
Sources: U.S. Small Business Administration, sba.gov – CDC/504 loan program guidelines.Frequently Asked Questions
How much do I need to put down on a 504 loan?
At least 10% of the project cost. Startups and special-use properties can be asked for 15 to 20%.
Can a 504 loan be used for working capital?
No. 504 loans fund fixed assets only: owner-occupied real estate, construction, and heavy equipment. Working capital belongs in a 7(a) loan.
Who provides the money in a 504 loan?
A bank or lender covers about 50% of the project cost, a Certified Development Company (CDC) covers up to 40% backed by the SBA, and you contribute the down payment.