SBA 504 Loans – For Owner Occupied Commercial Real Estate


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SBA 504 Loans – Helping small business owners purchase real estate and large equipment

Click here to download the guide “What is the SBA 504 Program?

An SBA 504 is a long-term, fixed-rate solution The U.S. Small Business Administration established the 504 loan to help businesses purchase owner-occupied commercial real estate and equipment while retaining working capital.

The SBA 504 loan puts financing within reach for small businesses through low down payments and long-term, low, fixed interest rates. It also reduces the risk to lenders through a shared financing structure.

To be considered for an SBA 504 loan, applicants must meet these eligibility requirements:

  • Operate as a for-profit company

  • Do business (or propose to) in the United States or its possessions

  • Has a tangible net worth less than $15 million and an average net income less than $5.0 million after taxes for the preceding two years.

  • Loans cannot be made to businesses engaged in speculation or investment in rental real estate.

  • Be an eligible type of business. While the vast majority of businesses are eligible for financial assistance from the SBA, some are not. Check this list of eligible and ineligible types of businesses to see if your company qualifies.

  • Under the 504 Program, Plan to use proceeds for an approved purpose. CDC/504  loan proceeds may be used for the financing of fixed assets like real estate or equipment. This list explains Eligible and Ineligible Use of Proceeds.

  • Not have funds available from other sources. SBA does not extend financial assistance to businesses when the financial strength of the individual owners or the company itself is sufficient to provide all or part of the financing. Both business and personal financial resources are reviewed as part of the eligibility criteria. If these resources are found to be excessive, the business will be required to use those resources in lieu of part or all of the requested loan proceeds.

  • Ability to repay the loan on time from the projected operating cash flow of the business

  • Good character. SBA obtains a “Statement of Personal History” from the principals of each applicant firm to determine if they have historically shown the willingness and ability to pay their debts and whether they have abided by the laws of their community

  • Relevant management expertise

  • Feasible business plan

Use of 504 Loan Proceeds

A 504 loan can be used for:

  • The purchase of land, including existing buildings

  • The purchase of improvements, including grading, street improvements, utilities, parking lots and landscaping

  • The construction of new facilities or modernizing, renovating or converting existing facilities

  • The purchase of long-term machinery and equipment

  • Refinancing debt in certain occasions

A 504 loan cannot be used for:

  • Working capital or inventory

  • Speculation or investment in rental real estate

Loan Structure

Financing for a typical 504 loan is broken into three parts, with only the 10 percent put down by the borrower. An additional 40 percent is provided by a Certified Development Company (CDC). CDCs are non-profit corporations that provide loans to encourage small business growth in their local communities and are unique to the 504 Loan program. The remaining 50 percent is provided by a banking partner.


Interest Rates & Fees


Generally, the project assets being financed are used as collateral. Personal guarantees of the principal owners are also required when there is any owner over 20%

Maturity Terms

Maturity terms for the 504 loan are usually 10 or 20 years. On the Bank part it will usually have a 5 year fixed rate.

Interest Rates

504 Loan- Interest rates on 504 loans are pegged to an increment above the current market rate for 5-year and 10-year U.S. Treasury issues. Click here for current rates.

Bank Loan- These rates are determined by the institution and rage from 4-6% based on the strength of the loan and current market conditions.


Fees total approximately 3-4 percent and may be financed with the loan.

Click here to download the guide “What is the SBA 504 Program?

If your small business is looking to purchase real estate for your business or large equipment, this is the loan program to look at. With low down payments you can stop paying rent and purchase a long term asset.

What is the SBA 504 program