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An SBA 504 loan is long-term, fixed-rate financing for major fixed assets such as real estate and heavy equipment, split three ways: a bank or other lender typically finances 50% of the project with a first mortgage, a Certified Development Company (CDC) finances 40% with an SBA-backed second mortgage, and you contribute 10% in most cases. Loans are generally capped at $5 million, or $5.5 million for certain energy-efficient or manufacturing projects. Terms are 10, 20 or 25 years, and the CDC portion carries a fixed rate pegged to 10-year U.S. Treasury rates. The loan cannot be used for working capital or inventory, and you apply through a CDC, not through the SBA.
Quick answer: A 504 loan finances buildings, land and long-life equipment. A lender typically covers 50%, a CDC covers 40% backed by the SBA, and you put in 10% (up to 20% for startups or special-purpose property). The maximum is generally $5 million ($5.5 million for certain energy or manufacturing projects), terms are 10, 20 or 25 years, and the CDC portion has a fixed rate. Fees total about 3% of the debt and can be financed.
Part of our guide to SBA Loans: Which Program Fits Your Business?.
How does an SBA 504 loan work?
A 504 loan is really two loans and a down payment, coordinated by a Certified Development Company, a nonprofit the SBA certifies to promote economic development in its community:
| Part of the project | Who provides it | Typical share |
|---|---|---|
| First mortgage | A bank or other third-party lender | 50% |
| Second mortgage | The CDC, backed by the SBA | 40% |
| Your contribution | You | 10% in most cases, up to 20% |
The CDC portion is funded by a debenture that the SBA guarantees in full, which is why its rate is fixed and usually below market. The bank sets its own rate and terms on its 50%.
What is the maximum SBA 504 loan amount?
504 loans are generally capped at $5 million. Certain eligible energy-efficient or manufacturing projects can go up to $5.5 million.
Since July 4, 2026, a business can combine 7(a) and 504 loans for up to $10 million in SBA-backed financing, double the earlier $5 million combined limit, under a rule the SBA announced on May 18, 2026.
What is the minimum SBA 504 loan amount?
SBA's own comparison of its loan programs lists 504 loans starting at $25,000. In practice, because a 504 loan finances a whole real estate or equipment project, the project behind it is usually far larger than that.
How much down payment does a 504 loan need?
Usually 10% of the project cost. The SBA says you may be required to contribute up to 20% in certain circumstances, and startups and special-purpose properties may need an additional contribution. A 10% contribution is one of the main reasons owners choose a 504 over a conventional commercial mortgage, because it keeps more cash in the business.
What is the maximum SBA 504 loan term?
504 loans come with 10, 20 or 25 year terms. Real estate is usually financed over the longer terms and equipment over the shorter ones.
What interest rate do SBA 504 loans charge?
The CDC's 40% portion carries a fixed rate for the life of the loan, pegged to an increment above the current market rate for 10-year U.S. Treasury issues. The SBA describes these rates as below market. The lender's 50% first mortgage has its own rate, set by that lender.
Who qualifies for an SBA 504 loan?
To be eligible, your business must:
- Be an operating business
- Operate for profit
- Be located in the U.S.
- Be small under SBA size requirements
- Not be a type of ineligible business
Since March 1, 2026, every owner of the business, direct or indirect, must also be a US citizen or US national whose principal residence is in the US. Lawful permanent residents (green card holders) can no longer own any share of a 504 borrower.
The SBA also looks for qualified management expertise, a feasible business plan, good character and the ability to repay. Loans cannot go to businesses engaged in nonprofit, passive or speculative activities.
Size. Besides the industry size standards, a business can qualify under the SBA's alternative size standard: tangible net worth of no more than $20 million and average net income after federal taxes of no more than $6.5 million over the two previous fiscal years, including affiliates.
Credit and history. The SBA does not publish a minimum credit score for 504 loans on its program pages. The CDC and the lender each apply their own underwriting, and many look for an established business with steady cash flow.
What can SBA 504 funds be used for?
A 504 loan can fund:
- Buying, building or renovating buildings or land
- Long-term machinery and equipment with at least 10 years of useful life left
- Consolidating or refinancing debt that meets the SBA's definition of qualified debt
A 504 loan cannot be used for:
- Working capital or inventory
- Refinancing debt that does not qualify
- Speculation or investment in rental real estate
Refinancing. Under the 504 debt refinancing program, a business that has operated for at least two years can refinance qualifying commercial debt that is secured by eligible fixed assets and has been paid on time for at least the last 12 months, up to 90% of the property's current appraised value, or 85% when the refinance also covers eligible business expenses.
How long does it take to get an SBA 504 loan funded?
The SBA does not publish a standard review time for 504 loans on its program pages. The SBA's Sacramento Loan Processing Center reviews every 504 application, and the CDC coordinates the lender, that review and the closing. Because a 504 project involves two lenders, an appraisal and often construction, it is one of the slower SBA options; our Small Business Loan Approval Times by Lender Type puts it at 60 to 90 days in typical practice.
What fees do SBA 504 loans have?
The SBA puts total 504 fees at about 3% of the debt, and they can be financed with the loan. The two SBA fees for loans approved from October 1, 2026 through September 30, 2027 are:
| Fee | FY 2027 |
|---|---|
| Upfront guaranty fee | 0.50% |
| Annual service fee | 0.203% of the outstanding balance (0.204% on a 504 debt refinance without expansion) |
| Manufacturers, certain food supply chain businesses and businesses in rural areas | Both fees waived, including on 504 debt refinance loans |
The SBA sets these fees each fiscal year, so check the current year's notice before you rely on them.
SBA 504 vs the other SBA loans
| SBA 504 | SBA 7(a) | SBA Express | SBA microloan | |
|---|---|---|---|---|
| Maximum amount | $5 million ($5.5 million for certain energy or manufacturing projects) | $5 million | $500,000 | $50,000 |
| What it funds | Real estate and long-life equipment | Most business purposes | Most business purposes | Working capital, supplies, equipment |
| Your contribution | 10% in most cases | Set by the lender | Set by the lender | Set by the intermediary |
| Maximum term | 10, 20 or 25 years | 10 years, 25 for real estate | As for 7(a); lines of credit up to 10 years | 7 years |
| Rate | Fixed on the CDC portion | Negotiated, capped at prime plus 3% to 6.5% | Negotiated, capped by the SBA | Set by the intermediary |
| Apply through | A Certified Development Company | An SBA lender | An SBA Express lender | A nonprofit intermediary |
For everything else, see SBA 7(a) Loan Requirements, Rates and Terms (2026) and, for the smallest amounts, SBA Microloan Program: Amounts, Intermediaries, Rates & Terms.
How many owners borrow for 504-type projects?
In our study of more than 1,000 funding applications, 29.0% were to buy equipment, second only to expansion, and 4.6% were for real estate or a commercial mortgage. Not every equipment purchase fits a 504 loan, which only funds equipment with at least 10 years of useful life. The figures are self-reported by applicants and describe what they asked for, not what they were approved for. See the TopFunders Small Business Funding Study.
How to apply for an SBA 504 loan
- Find a Certified Development Company in your area through the SBA's CDC directory or your local SBA district office. 504 loans are available only through CDCs.
- Confirm the project fits: real estate or long-life equipment, not working capital or inventory.
- Line up the lender for the 50% first mortgage. The CDC helps structure the package between the parties.
- Prepare your contribution, usually 10% of the project cost.
- SBA review and approval, then closing and funding of both loans.
What if a 504 loan is not the right fit?
If you need working capital, inventory or a business purchase, a 7(a) loan covers those. If your equipment has a shorter life, equipment financing may fit better. Before you compare, see What Business Financing Costs and our Business Loan Calculator: Monthly Payments and How Much You Can Borrow.
If you are not sure which route fits, TopFunders.ai introduces you to the funding partners ready to make you an offer, from a network of 30+ vetted partners. There is no credit check to get matched, and we never ask for your SSN or Tax ID to match you. A match is not an approval: each partner makes its own decision.
TopFunders.ai is not a lender, not a loan broker, not an SBA lender and not a Certified Development Company. We do not originate, underwrite, price or fund loans, and we make no credit decisions.
Frequently asked questions
What is an SBA 504 loan?
An SBA 504 loan is long-term, fixed-rate financing for real estate and heavy equipment. A lender typically finances 50% of the project, a Certified Development Company finances 40% backed by the SBA, and the business contributes 10% in most cases.
What is the maximum SBA 504 loan amount?
504 loans are generally capped at $5 million. Certain energy-efficient or manufacturing projects can go up to $5.5 million.
How much down payment does an SBA 504 loan require?
Usually 10% of the project cost. It can be up to 20% in certain circumstances, and startups and special-purpose properties may need more.
Can an SBA 504 loan be used for working capital?
No. A 504 loan funds real estate, buildings and long-term equipment. It cannot be used for working capital or inventory.
What are the terms of an SBA 504 loan?
504 loans come with 10, 20 or 25 year terms, and the CDC portion carries a fixed rate for the life of the loan.
Who qualifies for an SBA 504 loan?
A for-profit, operating business located in the U.S. that is small under SBA size standards and not in an ineligible industry, with qualified management, a feasible business plan and the ability to repay.
Can I refinance with an SBA 504 loan?
Yes, in some cases. A business that has operated for at least two years can refinance qualifying commercial debt secured by eligible fixed assets, up to 90% of the property's current appraised value.
Does TopFunders.ai make SBA 504 loans?
No. TopFunders.ai is not a lender, an SBA lender or a Certified Development Company. It introduces business owners to funding partners, and each partner makes its own decision.
The bottom line
A 504 loan is the SBA's tool for buying or building the place you work and the heavy equipment you work with. The 10% contribution and the fixed rate on the CDC portion are its strengths. The limits are just as clear: it does not fund working capital or inventory, and with two lenders and a CDC involved it is not fast. If your project is real estate or long-life equipment and you can wait, it is worth a conversation with a CDC.
Compare your options at TopFunders.ai. Matched to the partners ready to fund a business like yours, with no SSN or Tax ID required and no impact on your credit score. TopFunders is not a lender or a loan broker; every credit decision is made by the matched funding partner.
Sources
| Figure | Source (read 2026-09-27) |
|---|---|
| Five eligibility requirements; management, plan, character, ability to repay; nonprofit, passive and speculative exclusions; uses and exclusions; 10, 20 and 25 year terms; rate pegged above the 10-year Treasury; fees about 3% of the debt, may be financed; CDCs as the only route | SBA, "504 loans" page |
| 50% lender, 40% CDC, 10% contribution, up to 20%; startups and special-purpose properties; generally $5 million, $5.5 million for certain energy-efficient or manufacturing projects; below-market fixed rates | SBA, "504 Loan Program" borrower fact sheet (PDF on sba.gov, last updated March 21, 2025) |
| 504 loan sizes from $25,000 | SBA, "SBA loans program comparison" (lender pages) |
| Debt refinancing: two years in operation, 90% of appraised value, 85% with business expenses, 12 months current | SBA, CDC/504 lender page, "504 debt refinancing program" |
| Sacramento Loan Processing Center reviews all 504 applications | SBA, CDC/504 lender page |
| $10 million combined 7(a) and 504, effective July 4, 2026 | SBA news release 26-52, May 18, 2026 |
| Upfront fee 0.50%; annual service fee 0.203% (0.204% for debt refinance without expansion); both waived for manufacturers, certain food supply chain businesses and rural areas (FY 2027) | SBA Information Notice 5000-881796, "FY 2027 504 Program Fees", published September 3, 2026, effective October 1, 2026 |
| Alternative size standard: $20 million tangible net worth, $6.5 million average net income | SBA final rule, effective March 18, 2024 (89 FR 11703) |
| 60 to 90 days, typical practice | TopFunders.ai, Small Business Loan Approval Times by Lender Type |
| Study figures | TopFunders Small Business Funding Study, self-reported, more than 1,000 funding applications |
| Every owner, direct or indirect, a US citizen or US national with principal residence in the US; lawful permanent residents not eligible | SBA Procedural Notice 5000-876626, effective March 1, 2026 |
