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Here is a list of our Frequently Asked Questions


What are the main advantages of a 504 loan?

  • lower down-payment requirements
  • long repayment terms (20 years)
  • fixed rate for the term of the loan
  • projected income is considered, not just historical cash flows
  • collateral is typically the building being financed

How is a 504 loan structured?

Most 504-financed purchases are for office, retail or industrial buildings. SBA 504, fixed-rate loans finance 40 percent of the total purchase. A bank or other lender provides 50 percent and the business owner contributes a 10 percent down payment. For example, if the building purchase price is $500,000, the following would be the loan structure:

Bank 1st mortgage – $250,000

CDC 2nd trust deed – $200,000

Borrower downpayment – $50,000

How long does it take to get a 504 loan?

Straight purchases usually require no more than 60 days to fund. If construction is involved, this can extend the process.

What are the fees involved?

All the fees are financed into the loan; consisting of 2.625% of the loan amount plus legal fees of $2,500.

Are there prepayment penalties?

There is a declining prepayment penalty for the first 10 years of the loan, based on the loan amount and funding rate.

Can other costs be included in a 504 loan?

Yes, “soft costs” (e.g. appraisals, environmental, construction interest, closing costs) also can be financed in the 504 loan, allowing the small business to preserve working capital.

What is the maximum loan you can do with a 504?

SBA-504 loans can finance up to 40% of the total project cost, or $5 million. For manufacturing businesses, 504 loans can finance up to $5.5 million.

How big can the company be?

The business tangible  net worth must be less than $15 million. After-tax net profit must be $5 million or less, on average, for the prior two years.

How much space does the business have to occupy?

The business must occupy 51% of an existing building purchase or 60% if constructing a new facility.

What kind of equipment can be financed with a 504 loan?

Long-term machinery and equipment with a useful life greater than 10 years (e.g., a printing press).

Can home equity lines of credit be used for the borrower down payment?

If equity is borrowed and secured by another asset, CDC must demonstrate repayment of the loan for the equity contribution from sources other than the cash flow of the business (salary of owner does not qualify).

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