What is an SBA 504 Loan?

An SBA 504 loan is a government-backed loan for owner-occupied commercial real estate and other fixed assets. An SBA 504 loan is actually two different loans that are made at the same time. The first mortgage is from a bank or non-bank lender and covers up to 50% of the purchase price and while the second mortgage is from a CDC and covers up to 40% of the purchase price. You provide the remaining 10% in the form of a cash down payment.

What Can an SBA 504 Loan be Used For?

CDC / SBA 504 Loans can be used for:

  • Buying land, including existing buildings
  • Paying for property improvements like adding parking lots, connecting utilities, and even landscaping
  • Renovating an existing property
  • Building a new facility
  • Modernizing or converting existing facilities
  • Buying other fixed assets, like long-term equipment and machinery
  • Refinancing debt*

* Made permanent on June 24th, 2016, the SBA 504 refinance loan applies to debt that was primarily incurred (85%+) to acquire a fixed asset eligible under SBA 504 loan rules. The existing debt must be 2+ years old and in good standing.