What is an SBA 504 loan?

The SBA 504 loan program provides long-term, fixed-rate financing for major fixed assets such as commercial real estate and heavy equipment. It is structured as two separate loans: a conventional first mortgage from a bank (50% of project cost) and a second mortgage from a Certified Development Company (CDC) backed by SBA (typically 40%), with the borrower providing 10% down. The CDC portion is fixed-rate for 10, 20, or 25 years at below-market rates. Maximum project cost is $20 million (first loan portion). This program is designed to promote economic development and job creation, so eligible businesses must meet job creation or community development goals.