What is an SBA 504 loan? The 504 program explained
A 504 loan is the SBA's fixed-rate program for buying buildings, land and heavy equipment. It splits a project three ways and locks the SBA's share for up to 25 years.
How a 504 loan is structured
Every 504 project has three parts. A bank or credit union makes a first-lien loan for 50% of the project. A Certified Development Company, a nonprofit licensed by the SBA, funds 40% through a debenture the SBA guarantees. You put in 10%. The bank sets its own rate and term on its half; the CDC portion carries a fixed rate set at a monthly bond sale.
| Piece | Who funds it | Share | Rate and term |
|---|---|---|---|
| First lien | Bank or credit union | 50% | Set by the bank, often 10-year fixed, 20–25-year amortization |
| Second lien | CDC, SBA-guaranteed | 40% | Fixed for 10, 20 or 25 years; 6.57%–6.58% in November 2026 |
| Equity | Borrower | 10% | 15% for start-ups or special-purpose buildings; 20% for both |
What a 504 loan can pay for
- Buying land and an existing building
- Constructing or renovating a building
- Long-life machinery and equipment, including a car wash tunnel or a CNC line
- Refinancing existing commercial real-estate debt, in some cases with cash out for business expenses
It can't pay for working capital, inventory, goodwill or a business purchase. Those go on a 7(a) loan, and many borrowers use both.
Today's 504 rates
The November 5, 2026 pricing set the 25-year effective rate at 6.57% and the 20-year and 10-year at 6.58%, with manufacturers at 6.34% on 25 years. These include the SBA and CDC fees. Full history and how the blended rate works: SBA 504 loan rates.
Who qualifies
For-profit businesses with a tangible net worth under $20 million and average net income under $6.5 million after taxes for the past two years. The business must occupy at least 51% of an existing building it buys, or 60% of a new build, within a year. Owners of 20% or more guarantee the loan personally.
504 vs 7(a)
| 504 | 7(a) | |
|---|---|---|
| Use | Fixed assets only | Almost anything, including working capital |
| Structure | Bank 50% + CDC 40% + you 10% | One loan from one lender |
| Rate | SBA share fixed, 6.57%–6.58% | Usually variable, capped at prime + 3 (10.00%) over $350,000 |
| Maximum | $5 million SBA share ($5.5 million manufacturing) | $5 million total |
| Term | 10, 20 or 25 years | 25 years real estate, 10 years other |
Where to get one
Any bank in our SBA lender directory can do the first lien, and it will pair with a CDC in your state. Industry pages such as hotels, car washes and manufacturers show where 504 loans are used most.
Questions
What is an SBA 504 loan?
A 504 loan is long-term, fixed-rate financing for buildings, land and heavy equipment. A bank lends 50%, a nonprofit Certified Development Company lends 40% backed by the SBA, and the borrower puts in 10%. The SBA portion is fixed for 20 or 25 years.
What is the current SBA 504 interest rate?
The SBA-backed portion priced on November 5, 2026 at 6.57% effective for 25-year debentures and 6.58% for 20-year and 10-year, including fees. Manufacturers got 6.34% on 25 years. The bank sets its own rate on its half.
What is the difference between a 504 and a 7(a) loan?
A 504 is for fixed assets only and comes in two pieces with a fixed SBA rate. A 7(a) is one loan from one lender that can also cover working capital, inventory and business purchases, usually at a variable rate tied to prime.
How much can I borrow with a 504 loan?
The SBA portion is capped at $5 million, or $5.5 million for manufacturers and energy projects. With the bank's 50% on top, total projects of $12 million or more are common.
What is the down payment on a 504 loan?
10% for most borrowers. It rises to 15% for a start-up or a special-purpose property such as a hotel, car wash or gas station, and to 20% when both apply.
Free · takes 1 minute · no credit check
Get matched with an SBA lender
Answer four questions and see SBA lenders that fit your state, loan size and industry, with your maximum rate. Compare at least two quotes before you sign. Rates move monthly: check current SBA loan rates and the 504 rate.
Official information: sba.gov 504 loans; November 2026 504 debenture pricing.