CDC / SBA 504 Loans

Loan program that helps economic development by allowing small businesses to purchase, construct, or improve commercial real estate.


CDC / SBA 504 Loans Overview

The Certified Development Company (CDC) and Small Business Administration (SBA) 504 loan program provides financing to small businesses for the purchase, construction, or improvement of commercial real estate, such as an office building or warehouse. CDC/SBA 504 loans may also be used for the purchase and installation of other major fixed assets needed by the business, like heavy equipment or machinery.

Liberty SBF offers CDC / SBA 504 loans to businesses that have been in business for 3+ years. The lender typically requires a personal credit score of 680+ and at least a $1mm loan value.

Visit Liberty SBF

free-guideFree Checklist
For Buying a Business

How CDC / SBA 504 Loans Work

The CDC / SBA 504 loan program is designed to help small companies by providing them with long-term financing solution for their fixed asset needs at fixed interest rates, usually below market rates. It covers up to 90% of the total project costs. The low minimum down payment requirement helps keep a business cash flow positive.

The CDC / SBA 504 loan program structure distributes the loan to three parties:

  1. A participating conventional lender, usually a bank, puts up at least 50% of the total cost as the first trust deed loan. This loan may also be taken from a non-bank lender. This is subject to the lender’s own rate and term, and they have the first lien on the assets being financed.
  2. The CDC (Certified Development Company) lends up to 40% of the remaining project cost under the SBA 504 program, with the second lien.
  3. A minimum of 10% of the project cost is shouldered by the business owner as down payment. Certain circumstances may require the buyer to contribute up to 20% of the total project cost.

If the financing is used for the purchase or development of real estate properties, which is the usual purpose for 504 loans, the regular CDC’s loan term is for 20 years at a fixed interest rate. The loan term is 10 years if the purpose of financing is for the purchase of fixed equipment such as manufacturing machinery, printing presses, food processing machinery, commercial laundry equipment, and more.

Certified Development Companies are non-profit corporations established under the 504 code which aims to develop communities and support local economic growth in their areas through providing businesses with 504 loans. The 504 loan proceeds must be used for acquiring or developing fixed assets, including:

  • Purchase of land and land improvements, including utilities, parking lots, street improvements, and landscaping
  • Purchase of existing commercial or industrial buildings
  • Construction or renovation of existing buildings
  • Purchase of long-lasting equipment or machinery
  • Refinancing of debt that was primarily incurred to acquire a fixed asset, or for the expansion of the business through improving facilities

The 504 loan program may not be used for the following purposes:

  • As working capital
  • To purchase additional supplies or inventory
  • As promotional funding
  • To finance regular operating expenses (e.g. payroll)
  • To rent or lease properties
  • Repaying or refinancing of debt that was not originally incurred to acquire or renovate a fixed asset for business expansion

The maximum loanable amount for CDC / SBA 504 loan is $5 million for meeting SBA-defined policy goals and $5.5 million for small manufacturers or some types of energy-related projects. The project’s assets attached to the loan are generally used as collateral. Soft costs, such as appraisals, environmental, construction interest, and closing costs may also be included in SBA 504 financing.

This benefits the small businesses by allowing them to preserve working capital. Straight purchases of fixed assets usually take 60 to 90 days to fund, provided all requirements are in place. The process may take longer for projects which involve construction or renovation.


CDC / SBA 504 Loan Qualifications and Eligibility

To qualify for the CDC/SBA 504 loan program, the following factors must be taken into consideration:

  • The borrower must have a good credit score, ideally 680 or higher
  • The business must be operational for at least 3 years, profitable, and be a small business as defined by the SBA
  • The tangible net worth of the business must not exceed $15 million
  • Must have a steady flow of positive annual revenue, with the average net income of the company for the past 2 years not exceeding $5 million after taxes
  • The company must use at least 51% of the property for its own operations within the first year of ownership
  • 60% owner occupancy for newly constructed building is required
  • Minimum of 10-year economic life for equipment

It is also required for the business to create or retain 1 job for every $65,000 guaranteed by the SBA, or 1 job for every $100,000 for small manufacturers. This is because there are two goals of a CDC / SBA 504 loan, which include community development goals and public policy goals.

Community development goals include improving or stabilizing the local economy, stimulating other business development, providing new income to the community, assisting manufacturing firms in the US and businesses in labor surplus areas. Public policy goals include expanding small businesses owned by women and minorities as well as aiding rural development.

CDC / SBA 504 Loan Terms, Rates, and Fees

Because part of the loan (up to 50%) is taken from a conventional lender (bank or non-bank), this portion is subject to the lender’s terms and fees, which may be negotiated between the borrower and the lender. The private lender’s interest rates may either be fixed or variable, based on the current market.

The CDC portion of the loan (up to 40%) is subject to regulated rates, terms, and fees. The loan term options are either 10-year or 20-year. The interest rates are correlated with the current market rate for 5-year or 10-year U.S. Treasury issues. These interest rates are generally favorable for the borrowers.

The table below illustrates annual interest rates for the CDC portion (up to 40%) of the loan.

CDC / SBA 504 Loan Overview

Annual Fees & Interest Rates
10-year Loan
20-year Loan
Treasury Rate
5-year Treasury (currently at 1.76%)
10-year Treasury (currently at 2.21%)
Fixed Rate
Ongoing fees
Approximately 1.7%
Approximately 1.7%
Maximum Interest Rate

There is also a CDC servicing fee which ranges from 0.625% to 2%. Other fees you need to know include:

  • Central servicing agent fee of approximately 0.1%
  • SBA guarantee fee of approximately 0.914%
  • Legal fees

Bottom Line

The CDC / SBA 504 financing is recommended for small businesses who aim to acquire fixed assets or use the funds for the construction or renovation of real properties. This program helps the business’s working capital and cash flow by offering a low down payment requirement, long payment terms, and low interest rates.

Liberty SBF offers CDC / SBA 504 loans to businesses that have been in business for 3+ years. The lender typically requires a personal credit score of 680+ and at least a $1mm loan value.

Visit Liberty SBF

The Details:

Maximum Loan Amount
$14 million+

Typical Loan Term
10 - 20 years

Typical Interest Rates

30 - 60 days

Down Payment?

10% - 20%



Personal Guarantee?


Have a question?


small business loansLower downpayment requirements

small business loans

Up to 90% financing

small business loans

Longer payment terms, up to 20 years

small business loans

Fixed interest rates for the entire loan term

small business loansNo additional collateral required


SBA 504 loan is limited to financing fixed assets only

Businesses with annual revenues that exceed $15 million can’t apply for SBA 504 loan

It may take longer to process especially if the financing is intended for construction

How to Apply

Answer Simple Questions

Browse Your Loan Options


Get Funded in Record Time


Additional Resources

How Much Does it Cost to Buy a Business?

Guide to Franchise Financing

Success Stories

3 Business Financing Lessons from Steve Jobs and Other Famous Founders

Finding funding for a small business can be daunting. A Google search for “small business loan” brings up 180 million results! In part, this is because the last few years have seen a surge in business financing options. Nonetheless, some approaches stand the test of time. Here are 3 lessons you can learn from how […] Read More