Current Interest Rates

January 2023 504 Effective Fixed Rates:

6.28%   20 -Yr Fixed
6.31%    25 -Yr Fixed

SBA 504 Rates are published monthly

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What is the 504 Loan Program?
The 504 Loan Program is a U.S. Small Business Administration (SBA) funded program that provides financing to small and mid-sized businesses for the purchase of equipment and commercial real estate.

What can 504 loans be used for?
Business owners can use 504 loans for land and building purchases, new construction or renovation, leasehold improvements and purchases of heavy machinery, equipment and commercial vessels. They can also be used for soft costs such as title searches, attorney’s fees, appraisals, etc. Visit the SBA 504 Loan Program page for more information.

What advantages does the loan offer?
With low down payments and fixed, low, long-term interest rates, the 504 loan helps businesses retain working capital. It removes the uncertainty associated with refinancing and balloon payments, enabling long-term planning and business expansion. For lenders, the loan offers lower risk through shared financing, a low loan-to-value ratio and the ability to earn CRA credits.

What types of businesses are eligible?
Businesses must be for-profit enterprises with a tangible net worth not to exceed $15 million and net profit after taxes of no more than $5 million during the previous two years. The loans are available to individual business owners or multiple owners partnering on a project.

The 504 loan program serves a wide range of businesses, from auto repair shops to Internet companies, manufacturers, child care centers, law offices, hotels and motels, veterinary clinics and warehouses. Visit the Eligibility page for more information.

What’s the maximum amount of a 504 loan?
Typical 504 loan size varies from $150,000 to $5.5 million depending on eligibility and the job creation, community development and economic development goals met by the project. The SBA portion is usually 40% of the project budget.

How does financing work?
Capital Solutions works with lenders to assist you with your loan goals which could be up to 90 percent financing on a project. The partner lender typically provides 50 percent and A CDC oftentimes provides 40 percent.  The borrower may inject as little as 10 percent down payment, depending on the type of project. Visit the 504 Loan Structure page for more information.  Capital Solutions is an authorized agent of Foundation Capital for the state of AL and works with other CDC units in other states to facilitate 504 projects in their areas.


What type of property is classified as Special Purpose?

The SBA classifies the following types of properties as Special Purpose:

Dormitories; Cold storage facilities where more than 50% of total square footage is equipped for refrigeration; Tennis clubs; Golf courses; Swimming pools; Amusement parks; Sports arenas; Bowling alleys; Theaters; Marinas; Gas Stations; Service centers with pits and in-ground lifts; Car wash properties; Hospitals and other medical or health facilities (such as surgery centers, urgent care centers); Nursing homes; Assisted living facilities; Funeral homes with crematoriums; Cemeteries; Sanitary landfills; Museums; Clubhouses; Hotels and motels; Wineries; Railroads; Farms (including dairy facilities); Oil wells; Mines; Quarries; and Gravel pits.

How much of an equity contribution is required for an SBA 504 project?

Typically 10%. If the entity is considered a new business or the property is determined to be a Special Purpose Property, an additional 5% equity is required.

Can the equity contribution be financed?

Yes, under certain circumstances, the down payment can be borrowed.

Does the SBA 504 Program finance investment properties?

No, the program is designed for owner-occupied facilities.  The applicant must occupy 51% of an existing building and 60% of a newly constructed building.

What is the term of an SBA 504 loan?

A: 20 years on real estate; 10 years on machinery and equipment.

Is there a prepayment penalty associated with the program?

There is a declining prepayment penalty for half the term of the loan (i.e. 10-year prepayment penalty on real estate; 5-year prepayment penalty on machinery and equipment).

Why is the prepayment penalty required?

A prepayment penalty is required because investors in the secondary market are guaranteed a specific return when they purchase a pool of SBA 504 debentures subsequent to the funding of these loans.

 Are personal guarantees required?  If so, what are the guidelines in regards to personal guarantees?

A: Yes, the SBA requires personal guarantees for any individual owning 20% or more of the operating company or real estate entity. Other personal guarantees may be required if no individual owns more than 20%.

Can costs that have been incurred prior to the funding of the loan be included in the SBA 504 project?

Yes, certain preliminary costs associated with the project and incurred within the 9 months prior to loan application can be included in the financing.

Is life insurance required?

Typically, the SBA requires key man life insurance on all projects, but considers exceptions on a case by case basis.

Are not-for-profits eligible for SBA 504 financing?


Is flood insurance required by the SBA if the subject property is located in a Flood Zone?


What kind of job creation, community development and public policy goals must be met to obtain a 504 loan?
To be eligible for a 504 loan, applicant businesses must meet at least one of many job creation, community development or public policy goals through their expansion projects. The goal(s) met determine the maximum amount of the 504 loan. Talk to your local loan officer to learn more about loan amounts as they relate to the following goals:

Job creation goals

* Jobs are created within two years as a result of the project

* Jobs are retained—if it can be shown that jobs would be lost to the community if the project was not completed

Community development goals

* Project will help to improve, diversify or stabilize the economy of the locality

* Project will stimulate business development in the community

* Project will bring new income into the community

* Applicant business is a manufacturing firm

* Applicant business is in a labor surplus area

Public policy goals

* A minority individual owns and controls 51 percent or more of the applicant business

* A woman owns and controls 51 percent or more of the applicant business

* A veteran owns and controls 51 percent or more of the applicant business

* Project is located in a business district of a community with a written revitalization or development plan

* Project will expand exports

* Project is located in a rural area

* Project is necessitated by federal budget cutbacks

* Project is required by a federally mandated standard or policy

* Project will increase productivity and competitiveness (retooling, robotics, or modernization)

* Project will reduce energy consumption by at least 10 percent

* Project will use sustainable design (LEED Standards)

* Project will produce renewable energy, micropower, or renewable fuels, including biodiesel and ethanol