SBA 504 Loan Calculator
Calculate payments for real estate and equipment financing with 10% down payment and government-backed rates.
SBA 504 Loan Details
SBA 504 Payment Analysis
SBA 504 Loan Structure
Understanding SBA 504 Loans
Master the most advantageous small business real estate and equipment financing program
SBA 504 Program Overview
The SBA 504 loan program provides long-term, fixed-rate financing for small businesses to purchase real estate or equipment. It's designed to promote business growth and job creation through affordable capital access.
Key Program Features:
- Fixed-rate financing for real estate and equipment
- 10% down payment requirement (vs 20-30% conventional)
- Unique three-part financing structure
- Government backing reduces borrowing costs
- Terms up to 20 years for real estate purchases
504 Loan Structure
50% bank loan + 40% SBA debenture + 10% borrower equity = 100% financing coverage for eligible projects
Eligible Uses and Requirements
SBA 504 loans have specific use requirements that businesses must meet. Understanding these criteria ensures proper application and approval success.
Eligible Project Types:
- Owner-occupied commercial real estate purchase
- Construction of owner-occupied buildings
- Equipment and machinery purchases
- Major renovation and improvement projects
- Refinancing existing debt for eligible projects
Basic Requirements:
- Small business size standards compliance
- Owner-occupancy of at least 51% of building
- Job creation or retention goals
- Borrower equity injection of 10%
- Demonstrated ability to repay loans
Interest Rates and Payment Structure
SBA 504 loans feature two separate components with different interest rate structures, resulting in blended rates below market alternatives.
Bank Loan Component (50%):
- Market-rate loan from participating bank
- Typically prime rate + margin
- Variable or fixed rate options available
- Standard commercial loan underwriting
- Bank sets specific terms and conditions
SBA Debenture Component (40%):
- Below-market fixed rate set by SBA
- Based on 10-year Treasury rate plus spread
- Rate locked at time of debenture sale
- No prepayment penalties
- Government backing ensures favorable terms
SBA 504 vs Conventional Financing
Comparing SBA 504 loans to conventional commercial real estate financing highlights significant advantages for qualified small businesses.
SBA 504 Advantages:
- Only 10% down payment required
- Lower blended interest rates
- Fixed-rate SBA portion provides stability
- 20-year amortization preserves cash flow
- Government backing facilitates approval
Conventional Loan Features:
- Typically 20-30% down payment required
- Market interest rates without subsidies
- Shorter amortization periods common
- Faster approval and closing process
- More flexible use requirements
Down Payment Savings
On a $1M project, SBA 504 requires $100k down vs $200-300k for conventional financing - preserving $100-200k of working capital.
SBA 504 Application and Process
Application Timeline and Process
SBA 504 loan applications involve multiple parties and approval stages. Understanding the timeline helps businesses plan effectively for their financing needs.
Typical Timeline:
- Application preparation: 2-4 weeks
- Bank review and approval: 3-6 weeks
- CDC review and packaging: 2-3 weeks
- SBA review and authorization: 2-4 weeks
- Closing and funding: 1-2 weeks
Fees and Closing Costs
SBA 504 loans involve several fees and costs that businesses should budget for during the financing process.
SBA Guarantee Fees:
- 0.5% on SBA debenture amount under $1M
- 0.25% on amounts between $1M-$2M
- CDC processing fee (typically 1.5-3%)
- Third-party costs (appraisal, environmental)