A 504 loan splits the project into parts. A bank or other lender funds the balance with a first lien, usually about half. A certified development company (CDC) funds up to 40% through an SBA-guaranteed debenture with a second lien. You put in at least 10%, and more for a new business or a special-purpose building.
It pays for land, buildings, construction, renovation and machinery with a remaining useful life of at least 10 years. It cannot be used for working capital or inventory. The CDC portion runs 10, 20 or 25 years at a rate tied to 10-year Treasury rates.
Example: For a $2,000,000 building, the bank lends $1,000,000, the CDC lends $800,000 and you contribute $200,000.
The CDC portion is capped at $5 million per borrower, or $5.5 million per project for small manufacturers and certain energy projects.
Sources
- 504 loans — U.S. Small Business Administration (checked 2026-09-30)
- 13 CFR 120.801 How a 504 Project is financed — eCFR (Office of the Federal Register) (checked 2026-09-30)
- 13 CFR 120.931 504 Lending limits — eCFR (Office of the Federal Register) (checked 2026-09-30)
- 13 CFR § 120.910 Required contributions from the Borrower — Legal Information Institute, Cornell Law School (checked 2026-09-30)