The 504 Loan Program provides businesses with financing for major fixed assets such as office buildings, retail buildings, warehouse facilities, machinery, and equipment.

504 loans are financed through a unique public/private partnership that involves your business, Community Business Finance, and typically a bank or other private sector lender. In the 504 loan structure, your business puts up a minimum of 10% of the total funds for a project.

Community Business Finance provides up to 40% or $5 million ($5.5 million in certain circumstances), whichever is lower. The private sector lender provides the balance of the financing. The Community Business Finance portion of the loan is at a fixed rate for a term of 10, 20 or 25 years. The bank portion of the loan is at market rates and terms, negotiated between your small business and the bank.

The Community Business Finance portion of the financing is funded by the sale of a 100% federally-guaranteed debenture on the open market. The 504 Loan Program is a take-out financing program. Community Business Finance offers an upfront commitment to finance a project, and the participating private lender provides interim financing, by advancing up to 90% of the total project funds during the construction/acquisition period. After the project is complete, the proceeds from the debenture sale reimburse or “take out” the participating private lender (by the net debenture amount of the original SBA authorization).

The 504 Loan Program was established by Congress in 1987 to promote economic development in the trade area of a certified development company (CDC). The program's goals are met primarily through projects that create job growth or job retention in local communities. By distributing the amount needed to fund a project between three parties, banks are exposed to less risk and are more likely to approve the loan.

Overview of the 504 Loan Program

What Else You Need to Know

Program Benefits

10% Down Payment Preserves Working Capital

The 504 Loan Program provides up to 90% financing of the total project cost for most commercial real estate and equipment purchases. A 10% down payment allows business owners to preserve working capital for business growth and retain liquidity to meet operating needs.


Fixed rates for 10, 20, or 25 years

Community Business Finance offers below-market, fixed rates for up to 25 years. Why settle for variable or higher market rates when you can have peace of mind with a fixed rate?


Longer Loan Amortizations – Reasonable Monthly Payments

With the 504 Loan Program, 10-, 20-, and 25-year loan amortizations allow for smaller monthly payments. By utilizing the combined benefit of a 10% down payment, below-market interest rates, and longer loan amortizations versus traditional lending, you can minimize your monthly payments and realize the many advantages of owning commercial real estate.


Build Equity in Your Business by Owning vs. Leasing

Owning offers the control, consistency, and financial advantages that leasing cannot provide. In addition, mortgage payments are often lower than rent amounts. Owning not only saves you money in the long run but also frees up more of your available cash each month. Paying a mortgage instead of rent lets your money work for you instead of your landlord.


Finance Closing and Other Soft Costs

You can finance closing and other soft costs with your 504 loan. This keeps out-of-pocket expenses to a minimum in order to preserve capital for other uses.


No Balloon Payments, Calls, or Covenants

No balloon payments, calls, or negative loan covenants enable borrowers to have more control, more peace of mind, and less lender micro-management.


504 Loans are Assumable

If you sell your property in the future, the buyer can assume the loan at today's historically low interest rates.
Eligible Use of Funds
A business can use the proceeds from the 504 Loan Program for direct expenditures to acquire, construct, refinance, or convert a facility for company expansion or to purchase heavy equipment.



The value of free-and-clear land applied towards the borrower's equity/down payment is based on the actual cost if acquired within the last two years, or at the appraised fair market value if owned for more than two years.


Site Improvements

Grading, paving, landscaping, curb, and gutters up to 5% of the total project cost can be included in the project financing.


Purchase of One or More Existing Buildings

Your business must occupy at least 51% of the total square footage within the four walls of the project building(s).


Conversion, Expansion, or Renovation of One or More Existing Buildings

Note that the cost of improving a tenant space to be leased out cannot be included in 504 loan financing.


Construction of One or More New Buildings

Your business must occupy at least 60% of the project, with a projection indicating that your business will need additional space within 3 years and a reasonable intent that the business will occupy 80% of the total space within 10 years.
A contingency reserve for construction cost overruns, which cannot exceed 10% of construction costs, may be included in the calculation of the total project cost for the purpose of a 504 loan application.


Acquire and Install Heavy Machinery

These assets must have a useful life of at least 10 years and be at a fixed location. Furniture, fixtures, and equipment with a useful life of less than 10 years can be included in mixed-use projects where these are essential to and a minor part of the total project cost.


Refinance Eligible Real Estate and Equipment With or Without Expansion

Notes on unreasonable terms can be refinanced to improve interest rates, extend amortization, renovate/expand property, or cash out to use for eligible business expenses.


Professional Fees Directly Attributable and Essential to the Project

Title insurance fees, architect & engineering fees, environmental studies, appraisal reports, and land surveys can be financed into the project.


Repayment of Interim Financing Costs

including points charged or interest paid to a lender during the interim or construction phase of the project
Loan funds may not be used for working capital, mortgage broker fees, bridge loans during the construction period, business inventory, rolling stock (e.g., trucks), or refinancing the existing debt of the business.
See if Your Business Qualifies
Community Business Finance's 504 Loan Program can provide financing for most types of businesses. There are very few business types that are not eligible.


Eligibility Criteria

  • The business must be a legal entity such as a corporation, partnership, sole proprietorship, or limited liability company.
  • The owners must be U.S. citizens or legal permanent residents.
  • The business must be located in the United States.
  • The net worth must be under $15 million and the net profit under $5 million (2-year average).
  • The economic development goals must be achieved through project financing.


Ineligible Businesses

  • Non-profit business
  • Business engaged in lending, a passive holder of real estate and/or personal property (such as an apartment), or a life insurance company (an insurance agency is eligible)
  • Has restrictions on patronage
  • Government-owned entity (exception for Native American tribes)
  • Engaged in promoting religion
  • Consumer or marketing cooperative (a producer cooperative is eligible)
  • Engaged in loan packaging
  • Has associates who are incarcerated, on probation, on parole, or have been indicted for a felony
  • Ownership has equity interest by the lender, CDC, or associates in the applicant's concern
  • Provides prurient sexual material
  • Has previously defaulted on a federal loan
  • Engaged in political or lobbying activities
  • Speculative business
What You Need
Applying for a 504 loan requires forms and documentation just like any commercial loan. The lender will have the same expectations and you should be prepared to describe your business, how you will use the loan proceeds, and establish your ability to repay the loan.
You can increase your chances of a successful application process by providing the following information to your chosen lender:


Project Definition

The applicant should be able to articulate the need for the funds, present a well-defined budget of costs, and provide source documents for the uses of the funding (purchase agreements, construction estimates, bids for equipment, copies of notes, etc.).


Business Plan for Expansion or Start-up Business

This document describes your type of business, length of time in business, annual sales, and the number of employees. This is where you explain why you need a loan and what you will do with the money. You should demonstrate your expertise in your field of business, and your ability to succeed. Need help? Read our guide on How To Create a Business Plan.


Financial Projections for Expansion or Startup Businesses

This document is part of the business plan. It establishes your ability to repay the loan and allows the lender to assess the risk.  The proforma should project detailed revenues and expenses on a month-to-month basis for at least a 2-year period from the time operations commence.  The revenues and expenses should be justified with assumptions based on experience and research.


Business Financial Statements

These should include complete financial statements for the past three years, including balance sheets and profit and loss statements. You should also include you current interim financial statements, as well as signed business federal income tax returns for the previous three years.


Credit Rating Report

You should be aware of your credit rating so that there are no surprises, and you can correct any mistakes or problems before the loan application. A proven loan repayment history works in your favor.


Personal Financial Statements

For all SBA loans, personal guarantees are required from everyone owning 20% or more of the business. Therefore, the financial statements of these individuals must be included. They should list all personal assets, liabilities, and monthly payments. They should also include their personal federal income tax returns for the previous three years.



List all tangible assets that you are willing to put up to secure the loan. Collateral can be usable assets in the business as well as personal assets. Adequate collateral is required on all SBA  loans. 


Legal Documents

  • Business licenses and registrations required to conduct business
  • Articles of Incorporation
  • Copies of contracts with any third parties
  • Franchise agreements
  • Commercial leases


Buying an Existing Business

You will need to provide the following for the business being purchased:
  • Current balance sheet and profit and loss statement
  • Federal income tax returns for the previous two years
  • Terms of the sale, including the asking price and list of inventory, machinery or equipment, and furniture
How To Create a Business Plan
A solid business plan generally includes a description of the business, your financial history, financial projections, and the management plan. This outline will help you answer any questions the lender is likely to ask. Detailed descriptions of the components follow the outline.

Features of a Business Plan

  1. Cover Sheet
  2. Table of Contents
  3. Executive Summary
  4. Business Information
    1. Company Description
    2. Market Analysis
    3. Competition
    4. Management
    5. Funding Request
  5. Financial Information
    1. Historical Data
    2. Prospective Data
  6. Supporting Documents

Executive Summary

This is the most important section of a business plan. It identifies where your company is currently and how you would like it to grow. It highlights your company's strengths and why it will be successful. Even though this section is first in your business plan, it should be written last to accurately summarize the rest of the information. This is the lender's first impression of your company, so make it count.

Company Description

Describe your company in broad terms that include the different elements of your business. Be sure to explain how your product or service meets a need in the marketplace as well as the nature of your targeted consumers.

Market Analysis

Describe your knowledge and experience in your market. Explain the economics of the market, including its current size and projected growth. Define your pricing structure and how it will impact your revenue. Include any market research and conclusions. You should also address how you will comply with any government regulations or requirements involving your business.


Identify your competitors in the market. Explain how your company is unique and how you compare with your competition. Include the percentages of market share that your competitors serve and your current and projected market share.


Illustrate your organizational structure, including the profiles of your management team and details of company ownership. Explain the experience and qualifications of the people who make decisions for your company. Describe the divisions or departments in your company, and explain how these departments function. Include an organizational chart that shows who is in charge of each department. Explain how you will retain quality employees by describing salary compensation, benefits, and bonus structures.

Funding Request

Explain your funding requirements. Describe how much money you will need and how that money will be spent. Are you building a new office space or acquiring new equipment? Do you need working capital to fund a project? Explain how the expenditure will impact your business, and discuss your strategies for repaying the loan. This is critical information for the lender. They want assurance that you will be responsible for loan proceeds and have a plan to pay them back.

Historical Data

You will need to provide at least three years of historical financial data. Include income statements, balance sheets, and cash flow statements. List your company's assets that can be used for collateral.

Prospective Data

Lenders want to know how you expect your company to perform in the future, usually in the next 2 to 5 years. Include forecasted income and expenditures. Your projections should match your funding request. Adding a chart or graph that illustrates a ratio and trend analysis of your financial statements can quickly show a lender how your business will grow.

Supporting Documents

Include any information that will help the lender decide in your favor. You can include the resumes for all principals, contracts with suppliers, letters of reference, and your credit history.