What is the SBA 504 Loan?

The SBA 504 Loan is a specialized financing program created to support small businesses in purchasing owner-occupied commercial real estate, major machinery and equipment, or other fixed assets that facilitate growth. It combines the strengths of a private lender and a Certified Development Company (CDC) to deliver a two-part loan structure that reduces borrower equity requirements while providing long-term, fixed-rate financing for the portion financed by the CDC.

Why choose Discover Financial’s SBA 504 Loan?

Discover Financial’s SBA 504 product is crafted to align with the practical needs of business owners who prioritize predictable cash flow, asset ownership, and capital preservation. Highlights include:

• Low down payment: Keep more working capital on hand. Typical structures reduce required down payment compared to conventional financing.
• Long-term fixed rates: Enjoy stability for the portion of the project financed through the 504 structure, making budgeting easier with known principal and interest payments over 10, 20, or 25 years depending on the use of funds.
• Competitive overall financing: Combine Discover Financial’s conventional lending solutions with SBA-backed CDC financing for a tailored package that balances flexibility with affordability.
• Use of funds: Finance acquisition, construction, expansion, or significant equipment purchases that directly support business operations and growth.
• Preserve ownership: Secure property and equipment under your company name, building long-term equity and collateral value.

Typical loan structure

The SBA 504 model offered through Discover Financial generally follows the proven three-party structure:

• Bank or conventional lender (Discover Financial): Provides approximately 50% of the project cost as a first mortgage, offering immediate financing and local underwriting expertise.
• Certified Development Company (CDC) / SBA-backed second lien: Covers up to approximately 40% of the project cost with a fixed-rate, longer-term loan under the SBA 504 program.
• Borrower equity: Typically around 10% of project costs, with adjustments for special-purpose properties or startups.

This combination reduces the upfront cash requirement while securing long-term, fixed payments on a large portion of the financing.

Eligible uses of proceeds

Discover Financial’s SBA 504 Loan can be used for business-critical fixed asset investments, including but not limited to:

• Purchase of owner-occupied commercial real estate
• Construction of new facilities or expansion of existing buildings
• Renovations or tenant improvements to enhance operational efficiency
• Acquisition of long-life machinery and industrial equipment
• Land purchases when tied to a business facility project

Who is eligible?

The SBA 504 Loan is ideal for established small businesses with a demonstrated ability to repay and a need for fixed-asset financing. Key eligibility considerations typically include:

• Small business status under applicable size standards
• Owner-occupancy for real estate projects (generally 51%+ occupancy for existing buildings; higher for new construction)
• Strong business cash flow and credit history
• Reasonable personal and business collateral for the project
• Management experience and a viable business plan for projected growth

Discover Financial’s lending team works with applicants to evaluate qualifications, explain documentation requirements, and tailor a financing package that matches the business’s stage and goals.

Benefits for business owners

Choosing an SBA 504 Loan through Discover Financial can deliver tangible advantages for established business owners:

• Lower initial cash outlay: Reduced equity contribution preserves working capital for operations, hiring, and inventory.
• Predictable payments: Fixed-rate components protect against market volatility and simplify long-term planning.
• Asset ownership and appreciation: Owning property and equipment increases business net worth and may provide tax benefits through depreciation.
• Improved leverage: A blended financing approach often enables larger projects and strategic expansions that might not be possible with conventional loans alone.
• Local relationship, national resources: Access Discover Financial’s lending expertise combined with the SBA 504 program’s structured support to achieve practical outcomes.

Application process — straightforward and supportive

Discover Financial aims to make the application experience efficient and transparent. Typical steps include:

1. Initial consultation to discuss project scope, eligibility, and financing goals.
2. Submission of financial statements, tax returns, business plan, and property or equipment documentation.
3. Underwriting and coordination with the CDC to structure the two-part financing package.
4. Approval, closing, and disbursement so you can begin construction, acquisition, or equipment installation.
5. Ongoing relationship management to support repayment and future financing needs.

Throughout the process, Discover Financial provides clear guidance on timelines, documentation, and program-specific requirements so borrowers can proceed with confidence.

Common questions

Can startups qualify? The SBA 504 program typically favors established businesses with demonstrated cash flow. Startups may face stricter equity requirements, but Discover Financial can help assess alternatives.

What are typical loan terms? Terms are generally 10 years for equipment and 20 or 25 years for real estate, offering long horizons to align payments with asset life.

Is owner occupancy required? Yes, owner-occupancy is a common requirement for real estate projects. The specific occupancy percentage depends on whether the project is new construction or acquisition of an existing building.

If you’re ready to expand, invest in property, or modernize equipment, Discover Financial’s SBA 504 Loan provides a thoughtful financing path designed for predictable payments, lower upfront costs, and long-term asset ownership. Explore how this structured solution can support your next strategic investment and position your business for sustainable growth.