SBA 504 loans
Long-term, fixed-rate financing for buildings, land and long-life equipment, split between a bank and a nonprofit Certified Development Company backed by the SBA. You usually put in 10% yourself.
- Secured on assets
- Personal guarantee likely
How it works
A 504 project is financed in three parts:
- A bank or other lender lends at least as much as the 504 loan, usually about half the project cost, with the first lien on the property.
- A Certified Development Company (CDC), a nonprofit certified and regulated by the SBA, makes the 504 loan with an SBA guarantee, secured by a second lien. It is funded by a bond the SBA guarantees (a debenture).
- You put in at least 10% of the project cost. That rises to 15% for a business that has operated for two years or less, or for a limited or single-purpose building, and to 20% when both apply. In those cases the bank's share must be at least half the cost.
Amount: the 504 loan itself can be up to $5 million, or $5.5 million for a small manufacturer with all its production in the US or for some energy projects. The bank's loan is on top.
Uses: buying, building or renovating buildings and land, and machinery and equipment with at least 10 years of useful life left. Some existing debt on such assets can be refinanced. Not for working capital, inventory or rental property you will not use.
Terms: 10, 20 or 25 years. The 504 loan's rate is fixed and pegged above the current rate on 10-year US Treasury bonds. Fees total about 3% of the debenture and can be included in the loan.
Jobs: each project must create or keep one job for every $95,000 the SBA guarantees ($150,000 for small manufacturers and energy projects), or meet another public policy goal.
Who can borrow: an operating, for-profit business in the US that is small under SBA size standards and is not an ineligible kind of business. For new construction, the business must occupy at least 60% of the space at once. Owners of 20% or more generally guarantee the loan. The SBA's current rulebook (SOP 50 10 8.1, in force from October 1, 2026) limits 504 loans, like 7(a) loans, to businesses whose owners and guarantors are all US citizens or US nationals living in the US.
Upsides and downsides
Upsides
- Long fixed-rate terms for property and equipment
- You typically put in 10% of the project cost
- Fees can be added to the loan
Downsides
- Only for fixed assets, not working capital or inventory
- Two lenders, two sets of paperwork, and SBA job goals
- Not open to a business with any owner or guarantor who is not a US citizen or US national
Risks
- The property secures the loans, so you can lose it if the business cannot pay
- Owners of 20% or more generally guarantee the loan personally
- Missing the SBA's job or occupancy conditions can hold up or stop the loan
What it costs
- How it is priced
- A fixed rate on the 504 loan set above 10-year Treasury rates, plus the bank's own rate on its part
- Costs that are easy to miss
- Fees of about 3% of the debenture, often added to the loan
- A CDC servicing fee of at least 0.625% a year on the balance
- Appraisals, environmental reports and legal costs for the property
- The bank's own fees and rate on its part of the project
The 504 part is up to $5 million, or $5.5 million for small manufacturers and some energy projects. The bank's loan is on top.
Have a quote? True cost of a loan: work out the APR and total cost
Applying to an SBA program? Is my business small?: check whether your business counts as small
Does it fit?
Could fit when
- You need to buy, build or improve the property your business will use
- You need major equipment with a long useful life
Unlikely to fit when
- The business grows, makes, processes, distributes or sells marijuana or marijuana products, for medical or recreational use, even where the state allows it
- The business earns much of its revenue from gambling, adult content, or political or lobbying work (the SBA's limits are more than a third, more than 5% and more than half of revenue)
- You need working capital or money for stock, which 504 loans cannot pay for
- You need the money within weeks
- The owners will not give personal guarantees
- Any owner or guarantor is not a US citizen or US national living in the US
Who can use it
- Business types: Sole proprietorship, Partnership, LLC, S corporation, C corporation, Benefit corporation, Cooperative
- An operating business, run for profit, located in the US, that is small under the SBA's size standards
- At least 10% of the project cost from you (15% or 20% for newer businesses or special-purpose buildings)
- One job created or kept per $95,000 the SBA guarantees, or another public policy goal
- Every owner, direct or indirect, and every guarantor is a US citizen or US national living in the US
Not available for: Nonprofit, passive or speculative businesses; Speculation or investment in rental real estate; Any activity that is illegal under federal, state or local law; Businesses that grow, make, process, distribute or sell marijuana or marijuana products, for medical or recreational use, even where the state allows it.
Am I ready?
What a provider is likely to ask for. Tick what you have. Your ticks stay in this browser and nothing is stored. Checklist for all government-backed and community lending
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- SBA Form 1244
- Project costs
- Your contribution
Regulation and protections
Regulators: U.S. Small Business Administration (SBA); Consumer Financial Protection Bureau (CFPB).
Who runs it: Federal program.
SBA rules cap the CDC's fees, fix the 504 loan's rate from Treasury rates and set the terms. The Equal Credit Opportunity Act (Regulation B) covers business credit, so a lender that turns you down must tell you why or how to ask.
Federal Truth in Lending rules (Regulation Z) do not cover business loans. Ask for the rate, fees and total cost in writing.
Types of provider: Certified Development Companies (nonprofits certified by the SBA); Banks and other lenders that take the first-lien part.
Also consider
What has changed
- Marijuana businesses, medical or recreational, are listed as not eligible even where the state allows them (SOP 50 10 8.1), and the fit finder now says so.
- Checklist now follows SOP 50 10 8.1: SBA Forms 1244 and 413, recent financial statements, a debt schedule, credit reports, IRS Form 4506-C and the articles.
Sources
- SBA: 504 loans · checked October 17, 2026
- 13 CFR 120.931: 504 lending limits · checked October 17, 2026
- 13 CFR 120.910: borrower contributions · checked October 17, 2026
- 13 CFR 120.920: required participation by the third-party lender · checked October 17, 2026
- 13 CFR 120.971: allowable fees paid by the borrower · checked October 17, 2026
- 13 CFR 120.160: loan conditions (personal guarantees) · checked October 17, 2026
- 13 CFR 120.870: leasing project property (occupancy of new buildings) · checked October 17, 2026
- SBA: SOP 50 10 8.1, Lender and Development Company Loan Programs (effective October 1, 2026) · checked October 20, 2026
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