SBA 504 loans

Janover Capital editorial team · Checked November 9, 2026

Short answer

A 504 loan finances major fixed assets through a private lender and a Certified Development Company. The usual split is 50% third party lender, 40% CDC debenture, 10% borrower. The debenture maximum is $5,000,000, or $5,500,000 for small manufacturers (SOP 50 10 8.1, Sec. C, Ch. 1).

Maximum debenture: $5,000,000
Small manufacturer project: $5,500,000
Minimum debenture: $25,000
SBA upfront fee, FY 2027: 0.50%

Key facts

SBA 504 loans: key facts
Fact	Value
Maximum debenture	$5,000,000
Small manufacturer project	$5,500,000
Eligible energy project	$5,500,000
Minimum debenture	$25,000
Usual split	50% third party lender, 40% CDC debenture, 10% borrower
Your contribution	at least 10% of the financing, 15% for a new business or limited or special purpose property, and 20% for both
Loan terms	10, 20 or 25 years
SBA upfront fee, FY 2027	0.50%
SBA annual fee, FY 2027	0.203% of the outstanding balance
Who you apply to	A Certified Development Company

What a 504 loan is

A 504 loan provides long-term, fixed-rate financing for major fixed assets (sba.gov/loans/504-loans, read November 8, 2026). Certified Development Companies, known as CDCs, deliver it. SBA describes CDCs as community-based nonprofit partners that it certifies and regulates.

The current rules are in SOP 50 10 8.1, effective October 1, 2026. Section citations below refer to that document.

How the financing is split

A 504 project generally has three parts (Sec. C, Ch. 1, Para. B):

A private lender, called the Third Party Lender, makes the largest loan.
A CDC funds its share through a debenture that SBA guarantees in full.
You contribute the rest.

The split changes with risk:

Standard project: 50% third party lender, 40% CDC debenture, 10% borrower.
New business, or limited or special purpose property: 50% third party lender, 35% CDC debenture, 15% borrower.
New business and limited or special purpose property: 50% third party lender, 30% CDC debenture, 20% borrower.

A new business has generally operated for 2 years or less (App. 3). Your contribution can be cash, land that is part of the project, or borrowed funds subordinate to both loans (Sec. C, Ch. 1, Para. E.1.e).

What it can pay for

SBA lists these uses (sba.gov/loans/504-loans, read November 8, 2026):

Buying, building or renovating buildings or land.
Long-term machinery and equipment with a remaining useful life of at least 10 years.
Consolidating debt under 13 CFR 120.882(e).
Refinancing qualified debt under 13 CFR 120.882(g).

A 504 loan cannot pay for:

Working capital or inventory.
Debt that does not meet those refinancing rules.
Speculation or investment in rental real estate.

Two refinancing routes exist (Sec. C, Ch. 1, Paras. C.10 and C.11). With expansion, existing debt up to 100% of the expansion project cost can be refinanced if SBA's substantial benefit and other conditions are met. Without expansion, the debt must be Qualified Debt. 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.

The business generally must occupy the space. For an existing building, you must occupy 51% of the rentable property. For new construction, you must occupy 60% (Sec. A, Ch. 3, Para. C.1).

Who qualifies

Your business must operate for profit in the United States. It must also be small under SBA size rules and not be an ineligible type (sba.gov/loans/504-loans, read November 8, 2026). SBA also looks for qualified management, a feasible business plan, good character and the ability to repay.

Size: you can pass the industry size standard or SBA's alternative test (13 CFR § 121.301(b)(2)). That test allows tangible net worth of $20 million or less and average net income of $6.5 million or less.
Jobs: the jobs test is one job per $95,000 guaranteed, or one per $150,000 for small manufacturers and energy public policy projects (Sec. C, Ch. 1, Para. A).
Other objectives: a project can instead meet a community development or public policy goal (13 CFR § 120.862). The CDC's portfolio must still hold its jobs average.
Property types: apartment buildings and mobile home parks are not eligible (Sec. A, Ch. 1, Para. E).

Loan limits

The limit applies to the debenture, the CDC's share of the project (Sec. C, Ch. 1, Para. D.1):

Most projects: $5,000,000 outstanding for you and your affiliates.
Small manufacturers: $5,500,000 per project.
Eligible energy projects: $5,500,000 per project.
Minimum debenture: $25,000.

Policy Notice 5000-879058 limits total energy project debentures to $16,500,000 for one business and its affiliates. The matching sentence in SOP 50 10 8.1 omits that figure.

A 7(a) loan does not use up this limit. Policy Notice 5000-879058 says a 7(a) balance up to the maximum loan limit does not reduce the amount available under the 504 program. The 7(a) loan should be approved first (App. 16, Para. A.1.c).

Terms and rates

A 504 loan has a term of 10, 20 or 25 years, based on the remaining useful life of what you finance (Sec. C, Ch. 1, Para. D.2). The private lender's loan must run at least 7 years beside a 10-year 504 loan. It must run at least 10 years beside a 20-year or 25-year loan.

The debenture rate is based on market conditions for long-term government debt at the time of sale (Sec. C, Ch. 1, Para. D.3). Most commonly, the 10-year Treasury rate is the benchmark for 20-year and 25-year debentures. The 5-year Treasury rate is the benchmark for 10-year debentures. Because the rate is set at each sale, we do not print one here.

Fees

For loans approved October 1, 2026 through September 30, 2027, SBA's fees are (Information Notice 5000-881796):

Upfront guaranty fee: 0.50%.
Annual service fee: 0.203% of the outstanding balance, or 0.204% under the 504 Debt Refinance without Expansion Program.
Waiver: both fees are waived for manufacturers, listed food supply chain businesses and businesses in rural areas.

Other allowable fees are (Sec. A, Ch. 4, Para. E.2):

CDC processing fee: up to 1.5% of the net debenture.
Funding fee: 0.25% of the net debenture.
Underwriter's fee: 0.4% on 20-year and 25-year debentures, and 0.375% on 10-year debentures.
CDC servicing fee: at least 0.625% a year and no more than 2% a year. Above 1.5% in a rural area, or 1% elsewhere, the CDC needs SBA's prior approval.
Participation fee: 0.50% of the senior loan, one time. It applies when the private lender holds a senior lien. The lender, the CDC or you may pay it.

Many of these are financed in the debenture (Sec. C, Ch. 3, Para. B).

Credit tests and collateral

Cash flow is the primary source of repayment, not collateralProperty a lender can take and sell if a loan is not repaid. (Sec. C, Ch. 1, Para. E). Debt service coverageCash available for loan payments, divided by those payments. Above 1 means the cash covers them. Full definition must be at least 1.15:1 (Sec. C, Ch. 1, Para. E.1.d). If history falls short, the CDC must analyze at least 2 years of projections.

The 504 loan is usually secured by a second lien on the project property (Sec. C, Ch. 1, Para. B.1). Each person owning 20% or more of the business gives an unlimited personal guaranty (Sec. A, Ch. 5, Para. A.1).

How to apply

504 loans are available exclusively through CDCs (sba.gov/loans/504-loans, read November 8, 2026). SBA's site lists CDCs by area. The private lender must be in place at application. A letter of intent, term sheet or commitment letter shows that (Sec. C, Ch. 1, Para. B.1).

What this page cannot tell you

SBA's 504 page names both $5,000,000 and $5,500,000. The higher figure applies only to small manufacturers and eligible energy projects. The private lender sets its own loan terms within SBA's rules, so those vary by lender. We do not estimate approval odds.

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