In one sentence
An SBA program financing owner-occupied commercial real estate and equipment through a bank first mortgage plus a subordinate CDC debenture.
The longer version
The 504 structure splits a project into a conventional bank first mortgage (typically 50%), a subordinate SBA-backed debenture through a Certified Development Company (typically 40%), and borrower equity (10%). It funds owner-occupied real estate and heavy equipment for small businesses.
For lenders, the two-loan structure and CDC coordination add closing steps and documents beyond a conventional mortgage, so 504 closings reward a clear checklist across the bank, the CDC, and SBA.
Common questions
- How is an SBA 504 loan structured?
- Commonly as a bank first mortgage, a second loan from a Certified Development Company funded by an SBA-guaranteed debenture, and borrower equity, typically around 50, 40 and 10 percent.
- What can an SBA 504 loan finance?
- Owner-occupied commercial real estate and long-lived equipment for small businesses that meet SBA eligibility rules.
- What is the difference between SBA 504 and 7(a)?
- 504 is for fixed assets like owner-occupied real estate and uses a two-lender structure. 7(a) is more flexible in use, covering working capital and other needs, with a single guaranteed loan.
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