The SBA 504 loan program is a financing option that helps small businesses purchase real estate, equipment, and other fixed assets. To finance a project with a 504 loan, a Certified Development Company (CDC) and a private sector lender each finance a portion of the project. The typical components of a CDC/504 loan include a loan from a certified development company (CDC) for up to 40% of the total project cost, a conventional lender providing 50%, and the borrower contributing the remaining 10%.
A CDC is typically a nonprofit corporation set up to contribute to the economic development of its community. These mission-based lenders are located nationwide and operate primarily in their state of incorporation. CDCs receive approval to operate from the Small Business Administration (SBA).
Because of the nuisances of the 504 program, we encourage potential borrowers inquiry into the number of 504 loans the CDC and/or private bank has closed over the past year. Experienced, active CDCs and SBA lenders tend to close more loans and do so more proficiently than those not as experienced.
Unlike traditional SBA 7(a) loans, 504 loans must be fully collateralized by the assets being acquired. As a result of this limitation, the 504 program isn’t nearly as widely deployed by financiers as the 7(a) lending program. However, 504s may be an attractive alternative due to lower down payments requirements with certain loans. We have included a summary of key differences between the 7(a), 504, and USDA loan programs here.
Top SBA 504 CDCs by State
| State Rank | Project State | CDC Name | CDC Headquarters | # Loans | Avg CDC Loan | Avg 3rd Loan |
|---|---|---|---|---|---|---|
| 1 | Alaska | Evergreen Business Capital | Seattle, WA | 6 | $951,667 | $1,809,687 |
| 1 | Alabama | Southern Development Council | Mountain Brook, AL | 8 | $558,875 | $741,642 |
| 2 | Alabama | Florida First Capital Finance | Tallahassee, FL | 5 | $828,200 | $895,538 |
| 1 | Arkansas | Rural Missouri, Inc. | Jefferson City, MO | 9 | $653,444 | $745,826 |
| 1 | Arizona | Mortgage Capital Development C | Oakland, CA | 30 | $737,833 | $974,720 |
| 2 | Arizona | CDC Small Business Finance Cor | San Diego, CA | 29 | $853,724 | $1,013,790 |
| 3 | Arizona | Business Development Finance C | Tucson, AZ | 8 | $923,500 | $1,208,768 |
| 1 | California | Business Finance Capital | Los Angeles, CA | 148 | $1,075,851 | $1,372,510 |
| 2 | California | Mortgage Capital Development C | Oakland, CA | 145 | $1,157,159 | $1,438,110 |
| 3 | California | CDC Small Business Finance Cor | San Diego, CA | 143 | $1,255,378 | $1,547,976 |
| 1 | Colorado | B:Side Capital | Denver, CO | 48 | $750,083 | $1,207,399 |
| 2 | Colorado | Denver Urban Economic Developm | Denver, CO | 10 | $1,270,500 | $1,591,762 |
| 3 | Colorado | Pikes Peak Regional Developmen | Colorado Springs, CO | 7 | $1,009,143 | $1,354,669 |
| 1 | Connecticut | New England Certified Developm | Wakefield, MA | 22 | $805,909 | $1,016,508 |
| 2 | Connecticut | Community Investment Corporati | Hamden, CT | 20 | $466,500 | $642,868 |
| 3 | Connecticut | Housatonic Industrial Developm | Danbury, CT | 3 | $409,667 | $495,000 |
| 1 | Florida | Florida First Capital Finance | Tallahassee, FL | 114 | $712,465 | $914,178 |
| 2 | Florida | Florida Business Development C | Tampa, FL | 95 | $723,232 | $907,604 |
| 3 | Florida | Sunshine State Economic Develo | Clearwater, FL | 26 | $517,115 | $634,974 |
| 1 | Georgia | Capital Partners Certified Dev | Atlanta, GA | 19 | $1,303,211 | $1,596,756 |
| 2 | Georgia | Florida Business Development C | Tampa, FL | 12 | $689,750 | $811,079 |
| 3 | Georgia | Small Business Access Partners | Gainesville, GA | 12 | $713,667 | $895,092 |
| 1 | Hawaii | HEDCO Local Development Corpor | Honolulu, HI | 5 | $314,200 | $378,903 |
| 1 | Iowa | Iowa Business Growth Company | Johnston, IA | 9 | $937,556 | $1,378,500 |
| 2 | Iowa | Dakota Business Finance | Sioux Falls, SD | 5 | $920,800 | $1,448,200 |
| 3 | Iowa | Siouxland Economic Development | Sioux City, IA | 3 | $1,721,000 | $2,667,482 |
| 1 | Idaho | Capital Matrix, Inc. | Boise, ID | 18 | $664,556 | $837,850 |
| 2 | Idaho | Region IV Development Corporat | Twin Falls, ID | 12 | $297,417 | $360,306 |
| 3 | Idaho | East-Central Idaho Development | Rexburg, ID | 7 | $850,857 | $1,113,381 |
| 1 | Illinois | Small Business Growth Corporat | Springfield, IL | 102 | $778,853 | $944,842 |
| 2 | Illinois | SomerCor 504, Inc. | Chicago, IL | 56 | $732,643 | $992,588 |
| 3 | Illinois | Wessex 504 Corporation | Northfield, IL | 5 | $1,156,400 | $1,711,240 |
| 1 | Indiana | Indiana Statewide Certified De | Indianapolis, IN | 17 | $429,471 | $497,424 |
| 2 | Indiana | Premier Capital Corporation | Indianapolis, IN | 14 | $623,071 | $802,160 |
| 3 | Indiana | Community Development Corporat | Fort Wayne, IN | 7 | $1,161,143 | $1,385,261 |
| 1 | Kansas | Rural Missouri, Inc. | Jefferson City, MO | 7 | $765,857 | $966,304 |
| 2 | Kansas | Wakarusa Valley Development, I | Lawrence, KS | 4 | $273,750 | $355,935 |
| 1 | Kentucky | Capital Access Corporation - K | Louisville, KY | 4 | $405,750 | $435,493 |
| 2 | Kentucky | Community Ventures Corporation | Lexington, KY | 4 | $318,000 | $390,625 |
| 1 | Louisiana | Louisiana Capital Certified De | Lafayette, LA | 3 | $680,333 | $746,380 |
| 1 | Massachusetts | Granite State Economic Develop | Portsmouth, NH | 46 | $575,217 | $802,620 |
| 2 | Massachusetts | Bay Colony Development Corpora | Waltham, MA | 46 | $611,913 | $780,696 |
| 3 | Massachusetts | New England Certified Developm | Wakefield, MA | 24 | $984,708 | $1,273,163 |
| 1 | Maryland | Business Finance Group, Inc. | Fairfax, VA | 8 | $1,065,500 | $1,403,188 |
| 1 | Maine | Granite State Economic Develop | Portsmouth, NH | 38 | $574,447 | $775,264 |
| 2 | Maine | New England Certified Developm | Wakefield, MA | 3 | $1,017,667 | $1,645,833 |
| 1 | Michigan | Michigan Certified Development | East Lansing, MI | 35 | $699,886 | $917,999 |
| 2 | Michigan | Economic Development Foundatio | Grandville, MI | 16 | $984,500 | $1,419,457 |
| 3 | Michigan | Oakland County Business Financ | Waterford, MI | 6 | $480,000 | $554,871 |
| 1 | Minnesota | Minnesota Business Finance Cor | St. Cloud, MN | 45 | $561,244 | $709,449 |
| 2 | Minnesota | Twin Cities-Metro Certified De | Vadnais Heights, MN | 31 | $738,903 | $964,209 |
| 3 | Minnesota | Amplio Economic Development Co | Arden Hills, MN | 15 | $554,400 | $748,125 |
| 1 | Missouri | Rural Missouri, Inc. | Jefferson City, MO | 14 | $802,500 | $996,431 |
| 2 | Missouri | Enterprise Development Corpora | Columbia, MO | 3 | $538,333 | $701,293 |
| 1 | Montana | Capital Matrix, Inc. | Boise, ID | 8 | $283,250 | $372,931 |
| 2 | Montana | Dakota Business Lending | Fargo, ND | 6 | $675,667 | $901,625 |
| 3 | Montana | Big Sky Economic Development C | Billings, MT | 6 | $727,000 | $775,741 |
| 1 | North Carolina | Business Expansion Funding Cor | Charlotte, NC | 15 | $1,015,667 | $1,265,628 |
| 2 | North Carolina | Carolina Business Capital | Charlotte, NC | 7 | $763,714 | $970,621 |
| 3 | North Carolina | 504 Capital Corporation | Chesapeake, VA | 6 | $1,444,167 | $1,813,828 |
| 1 | North Dakota | Dakota Business Lending | Fargo, ND | 11 | $421,000 | $537,375 |
| 2 | North Dakota | Minnesota Business Finance Cor | St. Cloud, MN | 5 | $575,200 | $653,790 |
| 3 | North Dakota | Lewis & Clark Certified Develo | Mandan, ND | 3 | $333,000 | $402,227 |
| 1 | Nebraska | Nebraska Economic Development | Lincoln, NE | 10 | $632,400 | $754,793 |
| 1 | New Hampshire | Granite State Economic Develop | Portsmouth, NH | 36 | $548,250 | $705,343 |
| 2 | New Hampshire | Bay Colony Development Corpora | Waltham, MA | 10 | $375,500 | $460,336 |
| 3 | New Hampshire | Capital Regional Development C | Concord, NH | 9 | $460,444 | $591,417 |
| 1 | New Jersey | Trenton Business Assistance Co | Mercerville, NJ | 26 | $1,095,385 | $1,448,463 |
| 2 | New Jersey | Empire State Certified Develop | Albany, NY | 12 | $1,452,500 | $1,794,330 |
| 3 | New Jersey | Eastern American Certified Dev | Palisades Park, NJ | 6 | $559,667 | $639,583 |
| 1 | New Mexico | Capital Certified Development | Austin, TX | 10 | $541,300 | $612,552 |
| 2 | New Mexico | Enchantment Land Certified Dev | Albuquerque, NM | 10 | $505,400 | $622,906 |
| 1 | Nevada | Nevada State Development Corpo | Las Vegas, NV | 30 | $715,800 | $874,723 |
| 2 | Nevada | Mortgage Capital Development C | Oakland, CA | 23 | $728,087 | $887,084 |
| 3 | Nevada | CDC Small Business Finance Cor | San Diego, CA | 4 | $612,500 | $758,675 |
| 1 | New York | Empire State Certified Develop | Albany, NY | 73 | $1,228,616 | $1,703,794 |
| 2 | New York | Trenton Business Assistance Co | Mercerville, NJ | 17 | $1,752,471 | $2,198,059 |
| 3 | New York | Business Initiative Corporatio | Bronx, NY | 6 | $1,057,167 | $1,269,667 |
| 1 | Ohio | Ohio Statewide Development Cor | Columbus, OH | 17 | $346,706 | $437,423 |
| 2 | Ohio | Community Capital Development | Dublin, OH | 15 | $515,067 | $623,105 |
| 3 | Ohio | Alloy Development Co., Inc. | Cincinnati, OH | 11 | $1,202,636 | $1,563,867 |
| 1 | Oklahoma | Small Business Capital Corpora | Tulsa, OK | 3 | $516,333 | $625,082 |
| 1 | Oregon | Northwest Business Development | Spokane Valley, WA | 17 | $833,471 | $1,082,073 |
| 2 | Oregon | Cascade Capital Funding | Salem, OR | 11 | $988,091 | $1,198,852 |
| 3 | Oregon | Evergreen Business Capital | Seattle, WA | 11 | $1,016,182 | $1,283,404 |
| 1 | Pennsylvania | South Eastern Economic Develop | Exton, PA | 20 | $621,350 | $779,972 |
| 2 | Pennsylvania | Regional Development Funding C | Pittsburgh, PA | 15 | $565,333 | $680,829 |
| 3 | Pennsylvania | Empire State Certified Develop | Albany, NY | 13 | $935,231 | $1,185,016 |
| 1 | Puerto Rico | Corporation para el Fromento E | San Juan, PR | 3 | $146,333 | $174,427 |
| 1 | Rhode Island | Ocean State Business Developme | Warwick, RI | 14 | $413,286 | $487,261 |
| 2 | Rhode Island | New England Certified Developm | Wakefield, MA | 7 | $467,429 | $603,339 |
| 3 | Rhode Island | Bay Colony Development Corpora | Waltham, MA | 3 | $320,667 | $386,667 |
| 1 | South Carolina | Provident Business Financial S | West Columbia, SC | 10 | $983,200 | $1,459,025 |
| 2 | South Carolina | Appalachian Development Corpor | Greenville, SC | 5 | $474,000 | $576,500 |
| 1 | South Dakota | Dakota Business Finance | Sioux Falls, SD | 15 | $415,200 | $503,627 |
| 2 | South Dakota | South Dakota Development Corpo | Sioux Falls, SD | 4 | $653,250 | $694,624 |
| 3 | South Dakota | First District Development Com | Watertown, SD | 3 | $319,000 | $379,500 |
| 1 | Tennessee | Brightbridge, Inc. | Chattanooga, TN | 3 | $884,000 | $2,397,008 |
| 1 | Texas | Capital Certified Development | Austin, TX | 38 | $1,033,000 | $1,273,473 |
| 2 | Texas | LiftFund, Inc. | San Antonio, TX | 14 | $923,786 | $1,496,885 |
| 3 | Texas | Greater East Texas Certified D | Tyler, TX | 9 | $919,000 | $1,052,008 |
| 1 | Utah | Mountain West Small Business F | Salt Lake City, UT | 107 | $738,916 | $903,280 |
| 2 | Utah | Utah Certified Development Com | Ogden, UT | 30 | $1,019,433 | $1,229,533 |
| 3 | Utah | B:Side Capital | Denver, CO | 5 | $1,312,800 | $1,557,124 |
| 1 | Virginia | Business Finance Group, Inc. | Fairfax, VA | 18 | $549,500 | $678,186 |
| 2 | Virginia | 504 Capital Corporation | Chesapeake, VA | 15 | $596,800 | $701,450 |
| 3 | Virginia | Rappahannock Economic Developm | Fredericksburg, VA | 5 | $465,600 | $563,000 |
| 1 | Vermont | Granite State Economic Develop | Portsmouth, NH | 7 | $550,429 | $768,179 |
| 1 | Washington | Northwest Business Development | Spokane Valley, WA | 26 | $1,058,885 | $1,589,624 |
| 2 | Washington | Evergreen Business Capital | Seattle, WA | 25 | $848,800 | $1,016,170 |
| 3 | Washington | Ameritrust CDC | Edmonds, WA | 9 | $652,778 | $784,102 |
| 1 | Wisconsin | WBD, Inc. | Madison, WI | 104 | $747,644 | $906,589 |
| 2 | Wisconsin | Racine County Business Develop | Sturtevant, WI | 4 | $525,000 | $635,750 |
| 1 | West Virginia | Regional Development Funding C | Pittsburgh, PA | 3 | $654,000 | $895,000 |
| 1 | Wyoming | Frontier Certified Development | Casper, WY | 5 | $223,400 | $292,460 |
Note: “Avg 3rd Loan” is the average loan made by a private lender. The total debt for the average 504 borrower would be the combination of the average CDC loan and the average 3rd party loan.
State rankings based on number of loans approved and disbursed during last year (minimum of three loans).
Top 10 SBA 504 CDCs Nationally
| Certified Development Corp | CDC Hdqtrs | Avg 2022 loan | 2022 | 2021 | 2020 | 2019 | 2018 |
|---|---|---|---|---|---|---|---|
| Mortgage Capital Development Corp | Oakland, CA | $1,045,518 | 1 | 1 | 4 | 2 | 1 |
| CDC Small Business Finance Corp | San Diego, CA | $1,174,164 | 2 | 2 | 3 | 1 | 2 |
| Business Finance Capital | Los Angeles, CA | $1,075,851 | 3 | 4 | 9 | 9 | ** |
| Granite State Economic Develop | Portsmouth, NH | $585,641 | 4 | 5 | 8 | 4 | 3 |
| Florida First Capital Finance | Tallahassee, FL | $712,933 | 5 | 6 | 1 | 3 | 5 |
| California Statewide Certified | Davis, CA | $1,167,109 | 6 | ** | ** | 10 | ** |
| Mountain West Small Business Finance | Salt Lake City, UT | $743,916 | 7 | 7 | 6 | 5 | 6 |
| Florida Business Development Corp | Tampa, FL | $741,127 | 8 | 3 | 2 | 8 | 7 |
| Small Business Growth Corp | Springfield, IL | $756,209 | 9 | 10 | 10 | ** | 8 |
| WBD, Inc. | Madison, WI | $772,655 | 10 | 8 | 5 | 7 | 9 |
| Empire State Certified Development | Albany, NY | ** | 9 | 7 | 6 | 4 | |
| Evergreen Business Capital | Seattle, WA | ** | ** | ** | ** | 10 | |
| ** Not in top 10 for calendar year | |||||||
| Note: Rankings based on # of closed loans |
Top SBA 504 banks
There were 1,289 SBA 504 loans issued last year, so there are not many banks that participate in the program. The top 504 lenders do a large percentage of the total 504 loans as CDCs tend to partner with banks with vast experience. JP Morgan Chase, the top SBA 504 lender, did 132 loans last year, which equates to roughly 10% of all 504 loans. The top dozen 504 banks did 49% of all the loans last year. Here are the top 504 lenders ranked by loans issued last year:
| Rank | Bank Name | Bank Headquarters | Avg CDC Loan | Avg 3rd Loan | # of Loans |
|---|---|---|---|---|---|
| 1 | JP Morgan Chase Bank | Columbus, OH | $882,523 | $1,076,296 | 132 |
| 2 | Zions Bank | Salt Lake City, UT | $906,148 | $1,096,272 | 81 |
| 3 | Bank of America | Charlotte, NC | $1,040,961 | $1,240,329 | 76 |
| 4 | Bank Five Nine | Oconomowoc, WI | $1,127,583 | $1,422,063 | 48 |
| 5 | Wells Fargo Bank | Sioux Falls, SD | $1,148,800 | $1,419,246 | 45 |
| 6 | Harvest Commercial Capital | Laguna Hills, CA | $967,773 | $1,158,618 | 44 |
| 7 | City National Bank | Los Angeles, CA | $1,282,452 | $1,644,949 | 42 |
| 8 | First Citizens Bank | Mason City, IA | $972,919 | $1,160,830 | 37 |
| 9 | Keybank | Cleveland, OH | $717,118 | $999,235 | 34 |
| 10 | Glacier Bank | Kalispell, MT | $747,303 | $918,976 | 33 |
| 11 | MUFG Union Bank | San Francisco, CA | $1,854,303 | $2,596,913 | 33 |
| 12 | CalPrivate Bank | La Jolla, CA | $976,000 | $1,106,909 | 25 |
| 13 | First Citizens Bancshares | Raleigh, NC | $784,833 | $973,545 | 24 |
| 14 | U.S. Bank | Cincinnati, OH | $514,292 | $650,876 | 24 |
| 15 | First-Citizens Bank & Trust | Raleigh, NC | $854,130 | $1,066,303 | 23 |
| 16 | Tri Counties Bank | Chico, CA | $663,217 | $855,620 | 23 |
| 17 | Meadows Bank | Las Vegas, NV | $924,273 | $1,126,894 | 22 |
| 18 | Redwood Cu | Santa Rosa, CA | $684,227 | $790,843 | 22 |
| 19 | Community Banks of Colorado | Greenwood Village, CO | $1,398,750 | $1,797,445 | 20 |
| 20 | M&T Bank Corporation | Buffalo, NY | $1,009,263 | $1,423,717 | 19 |
| 21 | Mountain America Fcu | Sandy, UT | $858,053 | $1,068,860 | 19 |
| 22 | MVB Bank | Fairmont, WV | $1,055,737 | $1,374,545 | 19 |
| 23 | Poppy Bank | Santa Rosa, CA | $1,940,222 | $2,855,462 | 18 |
| 24 | TD Bank | Wilmington, DE | $760,529 | $916,617 | 17 |
| 25 | Enterprise Bank And Trust | Lowell, MA | $653,529 | $819,285 | 17 |
SBA 504 loan rates
Interest rates for SBA 504 loans are determined by the market and the current cost of funds to the U.S. Treasury. The SBA works with Certified Development Companies (CDCs) to provide financing to small businesses through the 504 loan program.
The 504 loan program provides long-term, fixed-rate financing to help small businesses acquire real estate, buildings, and other fixed assets. These loans are structured with a first mortgage from a private lender covering up to 50% of the project cost, a second mortgage from the CDC covering up to 40% of the project cost, and a down payment of at least 10% from the borrower.
The interest rate for the CDC portion of the loan is fixed at the time the loan is funded and is based on the current market rate for five-year and ten-year U.S. Treasury issues. The rate for the private lender portion of the loan is negotiated between the borrower and the lender and is typically higher than the CDC portion.
The interest rate for the CDC portion of the loan is typically lower than the interest rate for conventional financing, as the loan is guaranteed by the SBA. This lower interest rate can result in significant savings for small businesses over the life of the loan.
It is important to note that interest rates for SBA 504 loans may vary depending on the current market conditions and the borrower’s creditworthiness. Small businesses looking to obtain an SBA 504 loan should work with a qualified lender or CDC to determine the current interest rate and other terms of the loan.
As shown by the chart below, 504 loan rates have increased dramatically over the past few years as the Federal Reserve has raised interest rates, which increased the rates investors demanded for treasury bills. The 504 loan rates have stabilized in 2023, albeit at high levels relative to the prior few years.
FAQs related to SBA 504 loan program
Whare are the eligibility requirements for a 504 loan?
To be eligible for the SBA 504 loan program, a business must be a for-profit, small business that operates in the United States and has a tangible net worth of less than $15 million and an average net income of less than $5 million after taxes for the preceding two years.
What are the eligible uses of proceeds?
A 504 loan can be utilized for purchasing or refinancing fixed assets, such as real estate, buildings, land, and equipment, as well as financing improvements to existing assets.
Where to apply?
To apply for a 504 loan, you can contact a certified development company (CDC) in your area.
What are the loan terms?
504 loans are typically repaid over a period of 10-25 years, and payments are made directly to the CDC. Over 90% of SBA 504 loans are for 25 years, as evidenced by last year’s closed 504 loans:
| 504 Loan Term | Total Loans in $$ | % of Loans | Avg Loan | # of Loans |
|---|---|---|---|---|
| 10 years | $25,942,000 | 1% | $682,684 | 38 |
| 20 years | $221,777,000 | 8% | $614,341 | 361 |
| 25 years | $2,419,010,290 | 91% | $889,015 | 2,721 |
How does a 504 loan differ from the SBA’s 7(a) program?
The main differences between an SBA 504 loan and a 7a loan are that 504 loans are specifically for fixed asset financing, while 7a loans can be used for a wider range of business purposes. Additionally, 504 loans require a lower down payment and have longer repayment terms than 7a loans. The SBA 7(a) loan program is much larger than the 504 program.
What are the public policy goals of the 504 loan program?
The public policy goals of a 504 loan include promoting economic development and job creation by helping small businesses access affordable financing for fixed assets. The community development goals of a 504 loan include providing financing to businesses in underserved communities and promoting the development of businesses that contribute to the local economy.
What is the interest rate for a 504 loan?
The interest rate varies based on the lender and the specific terms of the loan. In addition to interest, 504 loans include an annual service fee of .642% to .682%.
How does the SBA 504 loan program work?
Under the SBA 504 loan program, a borrower typically obtains a loan from a certified development company (CDC) for up to 40% of the total project cost, a conventional lender provides 50%, and the borrower contributes the remaining 10%. The SBA guarantees the CDC loan, which helps reduce the risk for the CDC and makes it easier for the borrower to obtain financing.
What are the eligibility requirements for the SBA 504 loan program?
To be eligible for the SBA 504 loan program, a business must be a for-profit, small business that operates in the United States and has a tangible net worth of less than $15 million and an average net income of less than $5 million after taxes for the preceding two years.
What can SBA 504 loans be used for?
SBA 504 loans can be used to purchase or refinance fixed assets, such as real estate, buildings, land, and equipment, as well as to finance improvements to existing assets.