SBA 504 loans: rates, down payment and requirements

What can an SBA 504 loan be used for?

The 504 program is built for fixed assets that a business will use for many years. Eligible uses include:

• Buying land or an existing building
• Building a new facility, or renovating, expanding or converting an existing one
• Site improvements such as parking, utilities and landscaping
• Buying long-lived machinery and equipment
• Refinancing eligible fixed-asset debt, with or without an expansion, under the SBA’s refinancing rules
• Eligible soft costs, such as professional fees and some closing costs

A 504 can’t pay for working capital, inventory or real estate held as an investment. For those needs, look at a 7(a) loan or a working capital loan.

The property must be owner-occupied, meaning your business uses most of the building. Our commercial real estate loans page explains the occupancy rules and how a 504 compares with a 7(a) for buying a building.

How does an SBA 504 loan work?

A typical 504 project is split three ways (a bank loan, a CDC loan and your own contribution) in shares of 50% / 40% / 10% of the total project cost:

1. The bank loan covers the largest share and is secured by a first lien on the property. The bank sets its own rate and term within SBA rules.
2. The CDC loan covers the next share. It’s funded by a debenture that the SBA fully guarantees and is secured by a second lien.
3. Your contribution is at least 10% of the project cost, or more in the situations shown below.

Definition

Certified Development Company (CDC): a nonprofit organization certified by the SBA to make 504 loans in its area. The CDC packages and closes the 504 loan and services it for its full term.

Because the CDC’s money comes from selling the debenture to investors, the CDC portion isn’t funded until the project is complete. Until then, the bank usually provides an interim loan covering the CDC’s share, which the debenture pays off.

How much down payment does an SBA 504 loan require?

Your minimum contribution depends on how long the business has operated and what kind of property it’s buying:

Your situation	Minimum contribution
Established business, general-purpose property	10%
New business (operating 2 years or less)	15%
Special-purpose property, built for one kind of business, such as a hotel or gas station	15%
New business and special-purpose property	20%

A larger contribution usually reduces the CDC’s share, while the bank’s share stays the same. Ask the CDC which sources of money count toward your contribution.

How much can you borrow with an SBA 504 loan?

The SBA limits the CDC portion, the debenture, rather than the whole project:

• Standard limit: $5 million per business.
• Small manufacturers and energy projects: $5.5 million per project.
• Minimum debenture: $25,000.

The SBA doesn’t cap the bank’s loan, so the total project can be considerably larger than the debenture.

Since July 4, 2026, a business can have up to $10 million in combined 7(a) and 504 financing. When a project uses both, the 7(a) loan is approved first. Pairing the two helps when you need a building plus working capital or other costs a 504 can’t fund.

What are SBA 504 loan interest rates?

The CDC portion has a fixed rate for its full term. The rate is set when the SBA sells the debenture to investors, based on U.S. Treasury yields plus a spread, so you usually won’t know the exact rate until the project is complete.

The bank sets the rate on its own loan, which can be fixed or variable. Quotes for the CDC portion are often given as an effective rate that includes the ongoing fees built into the debenture. When you compare offers, ask for the all-in rate on both pieces.

How long are SBA 504 loan terms?

The SBA offers 10-, 20- or 25-year debentures. Real estate projects can use terms of up to 25 years, and equipment financed with a 504 must have a useful life of at least 10 years.

The bank’s loan has its own term, which is often shorter than the debenture’s. The CDC portion also carries a prepayment penalty that declines over the early years of the loan, so ask the CDC for the schedule if you might sell or refinance early.

What fees does an SBA 504 loan have?

For loans approved in fiscal year 2027 (October 1, 2026, through September 30, 2027), the SBA charges:

• An upfront fee of 0.50% of the debenture, waived for manufacturers, food-supply-chain businesses and rural businesses.
• An annual fee of 0.203% of the outstanding debenture balance, built into your monthly payment.

The CDC also charges processing, closing and servicing fees, and there are costs for selling the debenture. Most of these are financed into the debenture rather than paid in cash. The bank may charge its own fees on its loan, so ask both for a written estimate.

Does an SBA 504 loan require creating jobs?

Usually. The 504 program exists to support local economic development, so each project needs to create or retain jobs or meet a community development or public policy goal. The job standard is 1 job per $95,000 of debenture, with a higher dollar amount per job for manufacturers and energy projects.

A project that falls short on jobs can still qualify through another goal, such as revitalizing a business district, expanding exports, expanding manufacturing or reducing energy use. The CDC checks which goal your project meets as part of its review.

Who qualifies for an SBA 504 loan?

To qualify, a business generally needs to:

1. Operate for profit in the United States and meet the SBA’s size standards. The 504 program also offers an alternative size test based on net worth and net income.
2. Be owned by U.S. citizens or nationals. Since March 1, 2026, every owner (and every guarantor the SBA requires) must be a U.S. citizen or U.S. national living in the U.S.; lawful permanent residents are no longer eligible.
3. Occupy most of the property it finances, under the SBA’s owner-occupancy rules.
4. Show it can repay both the bank loan and the CDC loan from business cash flow.
5. Make the required contribution of 10% or more.
6. Not be an ineligible business type, such as a lender, a passive real estate investor or a business primarily engaged in gambling.

How do you find the right lender for an SBA 504 loan?

A 504 needs two partners: a CDC and a bank. CDCs serve specific areas, and banks vary widely in how often they make 504 loans, for which kinds of property and in which states. Choosing a CDC and bank that regularly work together can make closing smoother.

The SBA’s public 504 loan records show which CDCs and banks actually fund projects like yours. SBA Loan Connect ranks lenders using that data, so you can see who funds businesses like yours before you apply. Partner lenders are labeled. See how we rank lenders.