SBA 504 Loans: Fixed-Asset Financing for Business Growth (U.S.)

SBA 504 loans provide long-term, fixed-rate financing for major fixed assets that promote business growth and job creation. These loans are available through Certified Development Companies (CDCs), SBA’s community-based nonprofit partners.

Why Choose an SBA 504 Loan?

• Low Down Payment: As little as 10% down.
• Long Repayment Terms: 10, 20, or 25 years.
• Fixed Interest Rates: Stable payments over the life of the loan.
• Project-Based: Finance real estate, equipment, and improvements.
• Preserve Working Capital: Finance soft costs and keep cash for operations.

Loan Highlights

• Eligible Uses: Purchase or construction of buildings, land, long-term equipment, improvements, and some debt refinancing.
• Loan Amount Range: Up to $5.5 million (up to $5 million for most businesses, $5.5 million for manufacturing or energy projects)
• Interest Rate: Fixed, pegged to U.S. Treasury rates
• Loan Term: 10, 20, or 25 years
• Amortization: Fully amortizing
• Maximum LTV: Up to 90% (typical structure: 50% bank, 40% CDC, 10% borrower)
• Prepayment: Declining penalty for first 10 years

Advantages

• Lower Down Payment: Only 10% required from borrower
• Long-Term, Fixed Rates: Predictable payments
• Flexible Use: Real estate, equipment, improvements
• Soft Costs Included: Appraisals, closing, and more
• Preserves Cash: Less upfront capital required

Disadvantages

• Eligibility Requirements: Must meet SBA size and use guidelines
• Longer Approval Process: More paperwork and time
• Prepayment Penalties: Declining penalty for early payoff
• Owner-Occupancy: Must occupy 51% of existing or 60% of new construction

Eligibility & Property Types

SBA 504 loans are available for:

• Office, industrial, retail, warehouse, manufacturing, hotels, self-storage, medical, and more

Borrower requirements:

• For-profit U.S. business
• Tangible net worth < $20 million
• Average net income < $6.5 million (after taxes, last 2 years)
• Good character, management, and repayment ability

Frequently Asked Questions

What is an SBA 504 loan?

A government-backed loan for purchasing, building, or improving major fixed assets, offered through CDCs and regulated by the SBA.

What are the main benefits of SBA 504 loans?

Low down payment, long-term fixed rates, and project-based financing.

What are the downsides?

Eligibility requirements, longer approval, and prepayment penalties.

What can I finance with a 504 loan?

Land, buildings, equipment, improvements, and some debt refinancing.

How much can I borrow?

Up to $5.5 million (higher for manufacturing/energy projects).

Real Stories

“The SBA 504 loan allowed us to purchase our own building with just 10% down and a fixed rate. The process took time, but the terms were unbeatable.”
— Small Business Owner, California

Ready to Take the Next Step?

Glossary

• CDC (Certified Development Company): SBA-regulated nonprofit that delivers 504 loans. Learn more
• Fixed-Asset Financing: Loans for long-term assets like real estate and equipment. Learn more
• Prepayment Penalty: Fee for paying off a loan early. Learn more