What is an SBA 504 Loan?

A loan in conjunction with a lending partner used to purchase commercial real estate, construct a building, purchase long-term equipment or refinance eligible business assets.


Down Payment

10% in most cases

15% for a start-up business (less than two years in operation) or special-purpose property

20% if the project is both a start-up and special-purpose property

Equipment loans may qualify for 10% or 15%

Owner Occupancy

51% for the purchase of an existing building (renovations and expansions are eligible)

60% for a ground-up construction project (an additional 20% required within 3 years)

SBA Project Maximum

Up to $15 million

No maximum number of projects for small manufacturers


Fixed Interest Rate

Top-tier competitive rate fixed for the term of the loan.
The rate locks when the SBA loan funds.


Loan Term

10-, 20- or 25-year term
Fully amortized over the term of the loan (no balloon)

Eligible Use of Funds

Acquisition of existing buildings

Acquisition of land for impending construction

Building construction - hard and soft costs

Major renovations and/or additions to existing buildings

Purchase of capital equipment, including heavy machinery

Refinancing existing buildings and capital equipment

Lender’s interim points, interest & closing costs

Ineligible Use of Funds

Working capital

Goodwill from business acquisition


Franchise fees

Tenant improvements

Rolling stock (e.g. vehicles)

Eligible Businesses

Legal entity can be a corporation, partnership, sole proprietor, or limited liability company

Owners must be U.S. citizens or legal permanent residents

Located in the United States

Net worth under $15 million and net profit under $5 million (2-year average)

Ineligible Businesses

Non-profit business

A business engaged in lending

Passive business (e.g., apartments, shopping centers)

Job Creation/Public Policy Goals

1 new job must be created or retained for every $90,000 of the debenture amount

1 new job must be created or retained for every $140,000 of the debenture amount for small manufacturing

The job requirement can be waived if one of the following public policy goals is satisfied:

  • Woman, minority, or veteran ownership (51%+)
  • Rural development
  • Revitalizing economic development areas
  • Expanding exports
  • Projects that reduce energy consumption by at least 10% or generate renewable energy or fuel

Benefits for Lending Partners

Minimize credit risk – minimizes collateral risk for the lender by having a 1st lien position at 50% or better loan-to-value

Satisfy current customers – allows you to offer longer terms, fixed interest rates, and low down payments to your customers

Attract new customers – designed to finance new and expanding businesses – purchasing a facility is often a borrower’s biggest business loan and offers an opportunity to create an entire banking relationship

CRA credits – banks that participate in the SBA 504 Loan Program are eligible for Community Reinvestment Act (CRA) credit on certain projects

Benefits for Business Owners

Lower equity injection, which conserves working capital and retains liquidity to meet operating needs

Long-term fixed-rate financing

Eligible soft costs may be rolled into the financing