# SBA 504 loans: questions and answers **Short answer:** This page lists 26 answers on SBA 504 loans. Each gives the rule first and names the SBA source it rests on. Canonical page: https://www.sbaexpress.loans/answers/504/ Last checked: 2026-11-09 These answers cover how a 504 loan is split between a lender and a Certified Development Company, and the limits that apply. ## All 26 answers on SBA 504 loans Each entry gives the short answer. Open it for the full explanation and its sources. ### [How does an SBA 504 loan work?](https://www.sbaexpress.loans/answers/sba-504-loan-how-it-works/) A 504 loan splits a fixed-asset project among a third party lender, a Certified Development Company and you. The standard split is 50% third party lender, 40% CDC debenture, 10% borrower (SOP 50 10 8.1, Sec. C, Ch. 1, Para. B). ### [Can land you already own count toward a 504 down payment?](https://www.sbaexpress.loans/answers/can-land-count-toward-504-down-payment/) Yes, if the land is part of the project. Land bought less than 2 years before the application counts at cost. Land held 2 years or more counts at appraised fair market value (13 CFR § 120.911; SOP 50 10 8.1, Sec. C, Ch. 1, Para. C.1). ### [What is a limited or special purpose property under 504?](https://www.sbaexpress.loans/answers/sba-504-limited-or-special-purpose-property/) It is a limited-market property whose design, materials or layout restrict it to the use for which it was built. SBA's list includes hotels, gas stations, car washes and nursing homes. The usual structure is 50% third party lender, 35% CDC debenture, 15% borrower. ### [What is a Certified Development Company?](https://www.sbaexpress.loans/answers/what-is-a-certified-development-company/) A Certified Development Company is a nonprofit that SBA certifies and regulates to deliver 504 loans in an approved area. A 504 loan is available only through a CDC, and the CDC's debenture funds part of your project. ### [What is the maximum SBA 504 loan amount?](https://www.sbaexpress.loans/answers/sba-504-maximum-loan-amount/) The debenture limit is $5,000,000 for standard projects and $5,500,000 per project for small manufacturers and eligible energy projects. The minimum is $25,000. Total project cost can be larger, because the third party loan and your contribution are separate. ### [Can you have a 7(a) loan and a 504 loan at the same time?](https://www.sbaexpress.loans/answers/can-you-have-a-7a-and-504-loan-together/) Yes. SBA says a 7(a) balance up to the maximum loan limit does not reduce the amount available under the 504 program. Source: Policy Notice 5000-879058, effective July 4, 2026. The 7(a) loan should be approved first (SOP 50 10 8.1, App. 16, Para. A.1). ### [How is the interest rate on a 504 loan set?](https://www.sbaexpress.loans/answers/how-is-sba-504-interest-rate-set/) The debenture rate is set when the debenture is sold, based on market rates for long-term government debt. The 10-year Treasury most often benchmarks 20-year and 25-year debentures, and the 5-year Treasury benchmarks 10-year debentures. Source: SOP 50 10 8.1, Sec. C, Ch. 1, Para. D.3. ### [What repayment terms do the loans in a 504 project carry?](https://www.sbaexpress.loans/answers/sba-504-loan-repayment-terms/) The 504 loan runs 10, 20 or 25 years, based on asset life. The third party loan must run at least 7 years beside a 10-year 504 loan, and 10 years beside a longer one. Source: SOP 50 10 8.1, Sec. C, Ch. 1, Para. D.2. ### [What fees does an SBA 504 loan charge?](https://www.sbaexpress.loans/answers/sba-504-loan-fees/) Upfront fees include a CDC processing fee of up to 1.5%, an SBA guaranty fee of 0.50% for FY2027 and a 0.25% funding fee. An underwriter's fee also applies. These can be financed in the debenture. Ongoing fees include CDC servicing and an SBA annual fee. ### [Which 504 loans get the FY2027 fee waiver?](https://www.sbaexpress.loans/answers/sba-504-fy2027-fee-waiver/) In FY2027, both fees are waived for manufacturers, listed food supply chain businesses and businesses in rural areas. FY2027 covers loans approved October 1, 2026 through September 30, 2027. That means no upfront guaranty fee and no annual service fee (SBA Information Notice 5000-881796). ### [What happens to a 504 loan if you sell or pay it off early?](https://www.sbaexpress.loans/answers/sba-504-prepayment-and-sale/) You can pay off a 504 loan by paying the full balance, unpaid interest and fees, and any prepayment premium in your note. A buyer can assume the loan only with SBA's prior written approval (13 CFR §§ 120.937, 120.940). ### [How much of a building must you occupy under a 504 loan?](https://www.sbaexpress.loans/answers/sba-504-occupancy-requirement/) You must occupy at least 51% of the Rentable Property in an existing building and 60% in new construction. You may lease out the rest within limits (13 CFR § 120.131; SOP 50 10 8.1, Sec. A, Ch. 3, Para. C, p. 54). ### [How many jobs must a 504 project create or keep?](https://www.sbaexpress.loans/answers/sba-504-job-creation-requirement/) A 504 project must create or retain one job per $95,000 guaranteed, or one per $150,000 for small manufacturers and energy public policy projects. A listed community or policy goal can substitute if the CDC's portfolio average holds (SOP 50 10 8.1, Sec. C, Ch. 1, Para. A). ### [Which 504 projects qualify for the $5.5 million limit?](https://www.sbaexpress.loans/answers/sba-504-5-5-million-limit-projects/) Small manufacturers and eligible energy projects can reach $5,500,000 per project. A small manufacturer has a primary NAICS code in Sectors 31-33 and all production facilities in the United States. Source: SOP 50 10 8.1, Sec. C, Ch. 1, Para. D.1. ### [What can a 504 loan pay for, and what can it not?](https://www.sbaexpress.loans/answers/sba-504-eligible-and-ineligible-uses/) A 504 loan pays for major fixed assets such as land, buildings and long-term machinery and equipment, not working capital or inventory. Related professional fees and interim financing can be included. It cannot pay for franchise fees, advertising or trucks (13 CFR §§ 120.882, 120.884). ### [Can a 504 loan finance equipment without real estate?](https://www.sbaexpress.loans/answers/can-504-loan-finance-equipment-only/) Yes. A 504 project can be equipment alone. The equipment needs a useful life of at least 10 years and a fixed location. Source: SOP 50 10 8.1, Sec. A, Ch. 3, Para. A.1; Sec. C, Ch. 1, Para. C.2. ### [How does the 90% loan-to-value limit work on a 504 refinance?](https://www.sbaexpress.loans/answers/sba-504-refinance-loan-to-value-limit/) Qualified Debt can be refinanced under 13 CFR 120.882(g), up to 90% loan to value on a project that refinances only Qualified Debt. If your debt exceeds that, you add cash or fixed-asset collateral SBA accepts. Source: SOP 50 10 8.1, Sec. C, Ch. 1, Para. C.10. ### [Can a 504 expansion refinance debt at another location?](https://www.sbaexpress.loans/answers/sba-504-refinance-debt-at-another-location/) Yes, if the operation at the other location has the same NAICS code as the project location. The debt must have been incurred for the same small business, and the other expansion-refinance tests still apply (SOP 50 10 8.1, Sec. C, Ch. 1, Para. C.11). ### [What limits a 504 refinance that creates no new jobs?](https://www.sbaexpress.loans/answers/sba-504-refinance-no-jobs-limit/) Your headcount does. The 504 loan cannot exceed employees times $95,000 under SOP 50 10 8.1, Sec. C, Ch. 1, Para. C.10. 13 CFR § 120.882(g)(15) still prints $90,000, so ask your CDC which figure applies. ### [Can a 504 loan refinance an SBA loan or the bank's own debt?](https://www.sbaexpress.loans/answers/sba-504-refinance-sba-loan-or-same-bank-debt/) Yes, under conditions. An existing 7(a) or 504 loan needs lower payments and written notice to the current holder. Same-bank debt needs SBA's approval and the bank's certification that no potential loss shifts to SBA. Source: SOP 50 10 8.1, Sec. C, Ch. 1, Paras. C.10-C.11. ### [Can the seller carry back part of the price in a 504 deal?](https://www.sbaexpress.loans/answers/sba-504-seller-financing/) Yes. Seller financing must be subordinate to the 504 loan, and you cannot prepay it without SBA's prior written consent (13 CFR § 120.923). If it is part of your contribution, the CDC must obtain an appraisal. ### [Can a startup get an SBA 504 loan?](https://www.sbaexpress.loans/answers/can-a-startup-get-an-sba-504-loan/) Yes, but with a higher contribution. A business operating 2 years or less counts as new. The usual structure is then 50% third party lender, 35% CDC debenture, 15% borrower. Source: SOP 50 10 8.1, Sec. C, Ch. 1, Para. B. ### [Who approves an SBA 504 loan, the CDC or SBA?](https://www.sbaexpress.loans/answers/who-approves-an-sba-504-loan/) SBA makes the final decision unless the CDC has delegated authority. On an Accredited Lenders Program Express loan of $500,000 or less, the CDC decides credit. A Premier Certified Lenders Program CDC makes approval decisions, except certain eligibility issues (SOP 50 10 8.1, Sec. C, Ch. 1, Para. F.1). ### [What debt service coverage does a 504 loan require?](https://www.sbaexpress.loans/answers/sba-504-debt-service-coverage/) At least 1.15:1, calculated on the last fiscal year or the average of the last two. Source: SOP 50 10 8.1, Sec. C, Ch. 1, Para. E.1.d. If history falls short, the CDC must analyze projections. ### [Who finances a 504 project during construction?](https://www.sbaexpress.loans/answers/sba-504-interim-construction-financing/) An interim lender, often the same bank that holds the third party loan. It funds project costs until completion, and debenture proceeds repay it. Neither you nor an Associate of yours can be the interim lender (SOP 50 10 8.1, Sec. C, Ch. 1, Para. B; 13 CFR § 120.890). ### [What is the difference between a 504 loan and a 7(a) loan?](https://www.sbaexpress.loans/answers/sba-504-vs-7a-loan/) A 504 loan finances long-term fixed assets through a bank and a Certified Development Company. A 7(a) loan comes from one lender and can also cover working capital, inventory and business purchases. Each has its own limits, rates and fees.