Owner-occupied commercial real estate financing with as little as 10% down and a long-term fixed rate on the SBA debenture portion — structured through a bank, a Certified Development Company, and the SBA.
The SBA 504 loan is a U.S. Small Business Administration program that provides long-term, fixed-rate financing for the acquisition, construction, or renovation of owner-occupied commercial real estate and major fixed assets. Unlike a conventional single-lender mortgage, the 504 program uses a three-party funding structure: a private bank or credit union provides 50% as a first-lien loan, a Certified Development Company (CDC) — funded through an SBA-guaranteed debenture — provides 40% as a second lien at a fixed rate, and the borrower contributes a minimum of 10% equity.
The result is a financing structure that puts 90% loan-to-cost within reach for qualifying small businesses — with the CDC/SBA portion locked at a long-term fixed rate regardless of where interest rates move. This makes SBA 504 one of the most powerful commercial real estate financing tools available to owner-occupants.
Why SBA 504 vs. Conventional Commercial Financing?
Lower Down Payment
As little as 10% down — compared to 20–35% required by most conventional commercial lenders for similar property types.
Fixed Rate on CDC Portion
The SBA debenture carries a fully fixed rate for its entire term — rare in commercial lending and valuable for budgeting certainty.
25-Year Fully Amortizing
No balloon payment on the debenture — fully amortizing over 20 or 25 years, significantly reducing monthly cash obligations versus shorter-term loans.
No Cap on Total Project Size
The SBA caps the CDC debenture at $5.5M, but the bank's 50% first-lien portion is uncapped — enabling projects well above $10 million.
SBA 504 Loan Rates
Term
Fixed Rate - Purchase**
Fixed Rate - Refinance**
Max LTV*
Max Amortization
10 Years
5.88% - 5.88%
5.88% - 5.88%
90% - Owner-Occupied
10 Years
20 Years
6.01% - 6.01%
6.02% - 6.02%
90% - Owner-Occupied
20 Years
25 Years
5.95% - 5.95%
5.95% - 5.95%
90% - Owner-Occupied
25 Years
The SBA 504 Loan Structure: Who Funds What
Every SBA 504 transaction involves three separate funding sources closing in a coordinated sequence. Understanding who provides what — and in what lien position — is essential to structuring your project correctly.
50%
Bank / Private Lender
First mortgage lien
Variable or fixed rate
40%
CDC / SBA Debenture
Second lien position
Long-term fixed rate
10%
Borrower Equity
Down payment
Most projects
Special-use properties require 15% equity; start-up businesses require 20%. The total combined loan (bank + CDC) cannot exceed 90% of the appraised value or project cost.
The bank and the CDC underwrite their portions independently but coordinate toward a single closing timeline. The bank loan typically closes first, immediately followed by the CDC debenture funding. Your Commercial Loan Direct loan officer manages coordination between all three parties on your behalf.
SBA 504 Loan Parameters
Select a tab to review detailed loan parameters, eligibility criteria, eligible use of proceeds, and the document checklist.
SBA 504 Loan Terms & Amounts
SBA 504 Loan Parameters
Max CDC Debenture
$5,000,000 (most businesses); $5,500,000 (manufacturers & green energy projects)
Total Project Size
No maximum — the bank's 50% first-lien portion is uncapped by the SBA
Eligibility for the SBA 504 program is determined by the size of the business, the nature of the project, the intended use of the property, and the business's ability to create or retain jobs.
Business Eligibility
For-profit business operating in the United States
Business tangible net worth < $20 million
Average net income after taxes < $6.5 million (2-year average)
Management experience sufficient to ensure project success
Personal FICO score of 650+ typically required by participating lenders
No unresolved federal tax liens or recent delinquencies on federally-backed debt
Property & Occupancy Eligibility
Borrower's business must occupy ≥ 51% of an existing building
Borrower's business must occupy ≥ 60% of a newly constructed facility
Remaining space may be leased to third-party tenants to help service the debt
Properties must be located in the United States or its territories
Investment properties where the borrower's business does not occupy the building are ineligible
Job Creation & Community Development Goals
Create or retain at least 1 job per $90,000 of SBA debenture (most projects)
Manufacturers: 1 job per $140,000 of SBA debenture
Alternatively: meet a community development or public policy goal (rural area, minority business, etc.)
Job creation is measured over a 2-year period following loan closing
Ineligible Business Types
Non-profit organizations
Passive investment businesses and speculative development
Lending institutions, insurance companies, and financial businesses
Gambling enterprises and private membership clubs
Foreign-owned businesses (principal owner must be a US citizen or permanent resident)
SBA 504 is strictly a fixed-asset financing program. All proceeds must be used for the acquisition or improvement of long-life fixed assets. Working capital, inventory, and general debt consolidation are not eligible uses.
Eligible Uses
Purchase of owner-occupied commercial real estate (land and/or building)
Construction of a new owner-occupied commercial facility from the ground up
Renovation, modernization, or expansion of an existing owner-occupied facility
Purchase of machinery and equipment with a useful economic life of ≥ 10 years
Soft costs and closing costs directly related to the eligible fixed asset
Eligible refinancing of owner-occupied commercial real estate under qualifying conditions
Ineligible Uses
Working capital or operating expenses
Inventory or rolling stock
General debt consolidation (other than qualifying RE refinance)
Speculative investments or passive income properties
Refinancing of existing SBA 7(a) or 504 loans
Refinancing of debt to an associate of the borrower or an SBIC
A complete, well-organized submission moves through underwriting faster and with fewer conditions. Your CLD loan officer will provide a customized checklist — the items below cover the typical core requirements.
Financial Documents
3 years business federal tax returns (all entities involved in the project)
3 years personal federal tax returns (all owners with ≥ 20% interest)
Year-to-date profit & loss statement and balance sheet (within 90 days)
Personal financial statement (SBA Form 413)
Business debt schedule (all existing debt obligations and monthly payments)
Property & Project Documents
Fully executed purchase agreement or letter of intent (acquisitions)
Current independent appraisal (or instructions for ordering one)
Environmental Phase I report (all real estate transactions)
Environmental Phase II (if Phase I identifies recognized environmental conditions)
Contractor bids and detailed project cost budget (construction / renovation)
Architectural drawings and plans (ground-up construction)
Business & Organizational Documents
Articles of incorporation or organization
Operating agreement or bylaws
Business plan with financial projections (start-up businesses or significant expansions)
Copy of business licenses and professional certifications (if applicable)
Lease agreements for any third-party tenants currently in the property
SBA 504 vs. SBA 7(a): Which Program Fits Your Deal?
Both programs are government-backed and owner-occupancy required, but they serve different financing objectives. Here's a direct comparison of the key decision factors:
Feature
SBA 504
SBA 7(a)
Best For
Commercial RE & fixed assets
RE, equipment, working capital, acquisitions
Max Loan
$5.5M CDC + uncapped bank portion
$5,000,000
Down Payment
10% (most projects)
10–15%
Rate on SBA Portion
Fixed (CDC debenture)
Variable or fixed (negotiated)
Lender Structure
Bank + CDC (two closings)
Single lender
Working Capital
Not eligible
Eligible
Close Timeline
60–90 days
30–75 days
When to choose SBA 504: If your primary need is purchasing or constructing owner-occupied commercial real estate and you want rate certainty on the long-term debt, the 504's fixed-rate debenture is typically the stronger choice — especially for projects above $3M where the uncapped bank portion becomes advantageous.
Small businesses that already own their commercial property may be able to use the SBA 504 program to refinance existing commercial mortgage debt — in some cases pulling equity out for eligible business expenses. The refinance program operates under specific eligibility rules distinct from a purchase transaction.
Refinance Eligibility
Debt being refinanced must be at least 2 years old at time of application
Original debt must have been used to acquire eligible fixed assets (≥ 85%)
All loans must be current — no payment 30+ days past due in the past 12 months
Borrower's business must currently occupy ≥ 51% of the property
Business must have been in operation for ≥ 2 years
Refinance Restrictions
Cannot refinance an existing SBA 7(a) or SBA 504 loan
Cannot refinance USDA-guaranteed debt or any other federally guaranteed loan
Cannot refinance debt owed to an associate of the borrower
Combined bank + CDC loan cannot exceed 90% of appraised FMV
All approved loans must close within 6 months of SBA authorization
The 504 refinance is particularly useful for businesses that acquired property with a conventional loan and now want to lower their payment through a longer fixed-rate structure. Equity in the property may be tapped for eligible business expenses such as maintenance, equipment, rent, utilities, or inventory obligations incurred within 18 months of application.
SBA 504 Prepayment Penalty
The CDC debenture carries a declining prepayment penalty during the first half of its term. The exact schedule depends on the debenture term selected:
20-Year Debenture Schedule
Penalty applies only during the first 10 years:
Yr 1
10%
Yr 2
9%
Yr 3
8%
Yr 4
7%
Yr 5
6%
Yr 6
5%
Yr 7
4%
Yr 8
3%
Yr 9
2%
Yr 10
1%
No penalty from Year 11 through maturity.
Estimate Your Penalty
The penalty is calculated on the outstanding balance of the CDC debenture, not the original loan amount. Use our calculator to estimate the exact cost of prepaying your 504 loan at any point in the term.
Note: The bank's first-lien loan may carry its own separate prepayment terms negotiated directly with the lender.
How to Get an SBA 504 Loan with Commercial Loan Direct
The SBA 504 process involves more steps than a conventional commercial loan — but an experienced intermediary eliminates confusion and keeps your transaction moving. Here is exactly what to expect:
1
Pre-Qualification & Program Fit
Submit a quote request or call our team. We review your project details — property type, purchase price, business financials, and occupancy plan — to confirm that the SBA 504 program fits your transaction and determine whether a 10-, 20-, or 25-year debenture structure makes most sense. Pre-qualification is free and non-binding.
2
Bank & CDC Matching
We match your transaction to the right bank partner and Certified Development Company from our national network. Different banks and CDCs have different underwriting appetites for property types, geography, and borrower profiles — getting this match right is the most consequential step in the 504 process.
3
Document Assembly & Submission
We provide a tailored checklist and help you organize the required tax returns, financial statements, purchase agreement, environmental reports, and appraisal. The bank and CDC review your package in parallel. Complete submissions move significantly faster than piecemeal ones.
4
Lender Underwriting & SBA Authorization
Your bank and CDC each underwrite independently. Once both are satisfied, the CDC submits to the SBA for guarantee authorization. SBA review typically takes 5–21 business days depending on program volume and submission completeness. We track status with both parties on your behalf.
5
Commitment Letters & Conditions
Both the bank and CDC issue commitment letters with final terms and any outstanding conditions. We review these with you to confirm accuracy, identify any conditions that require attention, and ensure your timeline to closing is achievable.
6
Dual Closing & Funding
The bank loan closes first — you sign loan documents, the bank disburses funds, and the property transfers. The CDC debenture then closes, typically within a few days, as the debenture is sold to investors and the proceeds are used to pay down the bank's temporary second-lien participation. Total timeline: 60–90 days from complete application.
Why Work with Commercial Loan Direct on Your SBA 504?
The SBA 504 requires coordination across three parties — your bank, your CDC, and the SBA itself. Commercial Loan Direct acts as a single point of contact managing all three relationships, so your transaction doesn't fall through the cracks.
National Bank & CDC Network
Access to SBA-preferred lenders and CDCs in all 50 states — matched to your property type, geography, and financial profile, not just the first available lender.
504 Program Expertise
We understand the nuances of 504 structuring — equity injection requirements, job creation goals, special-use property rules — and keep your transaction compliant from day one.
Parallel Underwriting Coordination
We manage the bank and CDC underwriting timelines in parallel, preventing the delays that occur when these two processes fall out of sync.
Competitive Bank Terms
We negotiate the bank's 50% first-lien portion across multiple lenders to ensure you get the best available rate and terms on the portion the SBA does not fix.
Single Point of Contact
One dedicated loan officer from inquiry through dual closing — no being handed off between departments or repeating yourself to three different teams.
All Commercial Property Types
Office, retail, industrial, medical, self-storage, mixed-use, and special-use properties — we've structured 504 transactions across every eligible property type.
Ready to Structure Your SBA 504 Transaction?
Get a free, no-obligation quote. Our 504 specialists will confirm eligibility, identify the right bank and CDC match, and walk you through the full process.
The SBA 504 loan is a government-backed program for long-term, fixed-rate financing of owner-occupied commercial real estate and major fixed assets. It uses a three-party structure: a private bank funds 50% as a first-lien loan at a negotiated rate; a Certified Development Company (CDC) funds 40% via an SBA-guaranteed debenture at a long-term fixed rate; and the borrower contributes a minimum 10% equity injection. The SBA does not lend directly — it guarantees the debenture issued by the CDC.
The SBA caps the CDC debenture at $5,000,000 for most businesses and $5,500,000 for manufacturers and green energy projects. There is no SBA-imposed cap on the total project size, however — the bank's 50% first-lien portion is uncapped. This means a business can complete a $20 million+ real estate project: the bank funds ~$10M+, the CDC funds up to $5.5M, and the borrower contributes 10%.
The minimum borrower equity contribution is 10% for most projects. Two scenarios require more: special-use properties (such as gas stations, hotels, car washes, and car dealerships) require 15% down; and start-up businesses — generally defined as operating for less than 2 years — require 20% down. These requirements may stack: a start-up purchasing a special-use property would need 20% (the higher of the two). Equity can come from business assets, personal savings, or a seller note under certain conditions.
Yes, under the SBA 504 Refinance Program, qualifying businesses can refinance existing commercial mortgage debt. Key requirements: the debt must be at least 2 years old; the original proceeds must have been used to acquire fixed assets eligible under the 504 program; all loans being refinanced must be current; and the business must have occupied 51%+ of the property throughout. You cannot refinance an existing SBA 7(a) or 504 loan under this program. Excess equity in the property may be used for eligible business operating expenses.
The CDC debenture carries a declining prepayment penalty during the first half of the term. For a 20-year debenture: 10% in year 1, declining 1% per year to 1% in year 10, then no penalty for years 11–20. For a 10-year debenture: 5% in year 1 down to 1% in year 5, then no penalty thereafter. The penalty applies to the outstanding CDC debenture balance — not the original amount. The bank's first-lien loan has a separate prepayment provision negotiated independently. Use our SBA 504 Prepayment Calculator for a precise estimate.
SBA 504 loans typically close in 60–90 days from complete application. This timeline reflects the three-party structure: the bank and CDC underwrite in parallel (often 30–45 days), the SBA reviews and issues authorization (5–21 business days), and then the dual closing occurs — the bank loan first, followed by the CDC debenture sale within a few days. Well-organized applications submitted through an experienced intermediary like Commercial Loan Direct consistently close at the faster end of this range.
Any commercial property type is eligible as long as the borrower's business occupies at least 51% of the building (60% for new construction). Eligible property types include: office buildings, retail centers, industrial and warehouse facilities, medical and dental practices, hotels and hospitality (standard-use), manufacturing facilities, self-storage, mixed-use properties, and most owner-occupied special-use properties. Investment properties where the borrower's business does not occupy the building are not eligible.
Note: The commercial mortgage calculators
displayed in this website should be used as a guideline and do not represent a commitment to lend.
Commercial Loan Direct and CLD Financial, LLC are not liable for any calculation errors resulting from
the use of these calculators.
Bakersfield, CA Luxury Multifamily Non-Recourse · 10-Yr I/O
I had a tremendously good experience with CLD and especially with my loan specialist — she identified the ideal loan program and handled everything professionally.
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