The SBA 504 loan exists for one job: helping a business own the fixed assets it operates from — commercial real estate and major equipment — with a low down payment and a long-term fixed rate. Where 7(a) is the flexible generalist, 504 is the specialist for owner-occupied buildings. Jaken Finance Group helps you get matched to a 504 structure and can bridge the purchase when the SBA timeline is too slow. Request commercial financing or call (833) 264-7776.
How a 504 loan is structured
A 504 is really two loans plus your equity, a structure often summarized as 50/40/10:
- ~50% — a conventional first-lien loan from a bank or lender
- ~40% — a debenture from a Certified Development Company (CDC), backed by the SBA, at a long-term fixed rate
- ~10% — your down payment (15%–20% for startups or special-use property)
That layered structure is what lets a small business put as little as 10% down on a building it would otherwise struggle to finance conventionally.
What 504 funds — and what it doesn’t
Eligible: purchasing owner-occupied commercial real estate, ground-up construction of owner-occupied space, major renovations, and long-life equipment and machinery.
Not eligible: working capital, inventory, or general operating expenses — use 7(a) for those — and any non-owner-occupied investment property.
SBA 504 rates and terms (2026)
| Parameter | Detail |
|---|---|
| SBA/CDC portion | Up to $5.5M (total projects to ~$30M) |
| Rate | Long-term fixed via CDC debenture |
| Term | Up to 25 years on real estate |
| Down payment | As little as 10% |
| Occupancy | 51% existing / 60% new construction |
The fixed rate is the reason owner-operators choose 504 for real estate: it removes the interest-rate risk that variable-rate loans carry over a 25-year hold.
Fees and prepayment
Two practical points shape a 504’s true cost. First, fees: the CDC/debenture side carries its own fee schedule, and there was no SBA guaranty fee on the 504 program for fiscal 2025 — a meaningful saving versus 7(a), which does charge a guaranty fee that scales with loan size. Second, prepayment: the debenture typically carries a declining prepayment penalty over roughly the first decade, so 504 rewards borrowers who intend to hold the property rather than flip or refinance quickly. If your horizon is short or uncertain, a shorter-term bridge or a 7(a) may fit better. Model the all-in cost — rate, fees, and prepayment — not just the headline rate.
Eligibility
- For-profit U.S. small business occupying the majority of the property
- Sound business cash flow (typically ~1.15x coverage)
- As of March 1, 2026, 100% of direct and indirect owners must be U.S. citizens or U.S. nationals residing in the United States
504 vs 7(a) — and the faster path
Choose 504 when you’re buying or building a property your business will occupy and want a fixed rate; choose 7(a) when you need flexibility across working capital, acquisition, and real estate in one loan. Full breakdown: SBA 504 vs 7(a).
Because a 504 can take 45–90+ days, Jaken Finance Group can bridge the purchase now and let the 504 take it out later — see bridge now, SBA later. If the building will be non-owner-occupied, 504 won’t fit; consider owner-occupied commercial loans or investor products like DSCR.
A 504 worked example: buying your building
A dental practice buys the $1,000,000 building it occupies. A typical 504 stack:
- ~$500,000 (50%) — conventional first-lien bank loan
- ~$400,000 (40%) — CDC debenture, SBA-backed, long-term fixed rate
- ~$100,000 (10%) — owner down payment
Against a conventional owner-occupied loan that might require 20%–25% down, the 504 frees roughly $100,000–$150,000 of capital the practice keeps for equipment and working capital — while locking a fixed rate for the life of the debenture. That capital efficiency plus rate certainty is why owner-operators choose 504 for real estate.
504 for ground-up construction
The 504 program also funds owner-occupied construction — building the space your business will operate from. Two things change versus a purchase:
- Occupancy rises to 60% for new construction (versus 51% for an existing building)
- Draws and timeline extend the process, so a construction bridge is often used to fund the build, with the 504 as the permanent takeout at certificate of occupancy
See SBA construction loans for the owner-occupied build path, and commercial construction cost per square foot to sanity-check your budget.
Get matched for an SBA 504 loan
Buying or building the space your business runs from? We’ll help you pursue a 504 and bridge it if you need to move first. Request commercial financing or call (833) 264-7776.
Program details: SBA — loan programs. Rates and rules change; verify current terms at application. Jaken Finance Group helps owner-operators pursue SBA 504 financing and can bridge the purchase while the debenture is arranged.