SBA 504 Loan FirstBank Holding Co in USA
SBA 504 Loan
The SBA 504 (CDC/504) program provides small businesses with affordable, long-term, fixed-rate financing for major fixed assets — commercial real estate, buildings, and large equipment — so you can expand, modernize, or stabilize your business without sacrificing working capital.
What is an SBA 504 Loan?
The SBA 504 loan is a government-supported financing option delivered through Certified Development Companies (CDCs) in partnership with private lenders. It’s designed to help eligible small businesses acquire or improve owner-occupied commercial real estate and long-lived equipment with low down payment requirements and predictable, long-term, fixed interest rates on the SBA-backed portion.
Key Benefits
- Low down payment: Typically as low as 10% of project cost for many transactions, helping you preserve working capital.
- Long-term, fixed-rate financing: Terms commonly up to 25 years for real estate and up to 10 years for equipment, with a fixed rate on the SBA portion.
- Preserve bank credit lines: Shared financing structure lets your commercial lender retain a smaller first lien while the CDC takes a second lien.
- Lower total cost over time: Competitive fixed rates and longer amortization can reduce monthly payments and total financing cost.
- Support for growth and job creation: Designed to help businesses expand, modernize facilities, and invest in long-term assets.
Common Uses
SBA 504 financing is typically used for:
- Purchase of owner-occupied commercial real estate
- Construction, renovation, or expansion of facilities
- Purchase of long-term machinery and equipment
- Refinancing of existing eligible debt in support of business growth or job retention
Loan Structure & Typical Terms
The usual financing structure combines three parts:
- Senior lender (bank) — typically about 50% of project cost.
- CDC / SBA-backed loan — typically about 40% with a fixed interest rate and long term.
- Borrower equity — typically around 10% (may be higher for certain project types or startups).
Term lengths: typically up to 25 years for real estate and up to 10 years for equipment. Interest on the CDC portion is generally fixed and based on market-rate benchmark securities plus a spread.
Who Qualifies?
Eligibility is determined by SBA size standards and program rules. In general:
- Must be a for-profit small business that meets SBA size standards for its industry.
- Business must occupy and use the financed real estate or equipment (owner-occupancy requirements apply).
- Project should create or retain jobs or meet public policy goals (community development, energy efficiency, etc.).
- Strong credit history and ability to repay are required.
What the SBA 504 Loan Doesn’t Cover
- Short-term working capital or inventory financing (use SBA 7(a) for these needs).
- Investment real estate or properties not primarily owner-occupied.
- Certain types of businesses and uses restricted by SBA policy (reviews required).
Fees & Process Overview
Borrowers should expect typical closing costs and fees, including CDC processing fees and SBA guarantee fees, which can often be financed as part of the project. The approval process involves your commercial lender and a local CDC; timelines vary but are generally longer than a standard bank loan due to program documentation and job-creation assessments.
SBA 504 vs SBA 7(a)
While both support small businesses, SBA 504 is optimized for long-term fixed-rate financing of fixed assets and major investments in facilities and equipment. SBA 7(a) is more flexible for working capital, smaller equipment purchases, and other general business needs where fixed-rate long-term amortization is not the primary objective.
Get Expert Help
Securing an SBA 504 loan involves coordination between your lender and a Certified Development Company. We can help you evaluate whether SBA 504 is the right fit, estimate potential terms, and connect you with local CDC partners to begin the application process.
