What Is the SBA 504 Loan Program?
The 504 program is administered by the U.S. Small Business Administration (SBA) in partnership with Certified Development Companies (CDCs) and private lenders. It is designed for owner-occupied commercial real estate purchases, ground-up construction, and long-life equipment.
Key Program Highlights:
Loan amounts up to $5.5 million for the SBA portion (total project financing can exceed this when combined with bank financing)
Fixed interest rates for the life of the loan
Low down payment requirement (typically 10%)
Designed to promote business expansion and job creation
SBA 504 Loan Eligibility Requirements
To qualify for SBA 504 financing, your business must meet the following criteria:
Operate as a for-profit company in the U.S. or its territories
Have a tangible net worth under $20 million
Have an average net income under $6.5 million after taxes for the prior two years
Contribute at least 10% equity injection toward the project
Meet SBA size standards
Demonstrate management expertise, a feasible business plan, good character, and repayment ability (including projections based on future growth)
Not Eligible: Nonprofits, passive businesses, speculative ventures, or certain investment real estate projects.
Eligible Uses for SBA 504 Financing
A 504 loan may be used for the purchase, construction, or improvement of assets that drive long-term growth, including:
Purchase or construction of owner-occupied commercial real estate
Ground-up development projects
Major improvements to land, utilities, parking lots, landscaping, or existing facilities
Long-term machinery and equipment with at least 10 years of useful life, including manufacturing equipment and select AI-supported production machinery
Refinancing qualified debt under SBA guidelines (13 CFR 120.882, paragraphs (e) and (g))
Ineligible Uses
SBA 504 loans cannot be used for:
Working capital or inventory
Debt that does not meet SBA “qualified debt” requirements
Speculative investment in rental real estate
Financing AI-related working capital, intellectual property, or consulting services soft costs
Looking for flexible financing beyond fixed-asset projects?
Learn how the SBA 7(a) loan program can provide working capital, business acquisition financing, and owner-occupied real estate loans with competitive terms. Compare the SBA 504 vs. SBA 7(a) to find the right solution for your business.
| Feature | SBA 504 Loan Program | SBA 7(a) Loan Program |
|---|---|---|
| Primary Purpose | Fixed-asset financing for owner-occupied commercial real estate and long-life equipment | Flexible financing for working capital, real estate, equipment, and business acquisitions |
| Loan Amounts | SBA portion up to $5.5 million (total project financing can be higher) | Up to $5 million |
| Terms | Up to 25 years for real estate, up to 10 years for equipment | Up to 25 years for real estate, up to 10 years for equipment/working capital |
| Interest Rate | Fixed for the life of the loan | Variable or fixed, typically tied to Prime plus a spread |
| Down Payment | Typically 10% (may be higher for special-use properties or startups) | Typically 10–20% depending on lender and use |
| Best For | Businesses expanding or acquiring property/equipment with stable long-term financing needs | Businesses needing flexible funds for growth, acquisitions, or working capital |
Why Work With INSIGNIA Financial Services
Navigating SBA financing requires deep program knowledge, lender relationships, and deal structuring expertise. At INSIGNIA Financial Services, we provide:
Expert guidance through current SBA program requirements
Tailored financing solutions for commercial real estate, equipment purchases, and business acquisitions
Access to competitive lender networks to secure the best possible terms
Ready to Explore SBA 504 Financing?
Our SBA loan specialists can help you evaluate eligibility, structure your deal, and guide you from application through closing.
📞 Call us at 847-276-3670 or Schedule a Consultation to get started.
