SBA 504 Loan Guide (2026): Requirements, Down Payment, Rates & Uses

If your business pays rent on a building it could own, or needs heavy equipment that will last a decade, the SBA 504 loan is built for you. It's one of the lowest-down-payment ways to buy commercial real estate as an owner-operator, with long-term fixed rates on the SBA portion.

How a 504 Loan Is Structured

A 504 deal has three pieces, usually split like this:

~50% — a conventional lender (bank or credit union) in first position
~40% — a Certified Development Company (CDC), backed by an SBA-guaranteed debenture, in second position
~10% — your down payment

Start-ups or special-purpose properties (hotels, gas stations, and similar) often require 15%, and both together can require 20%.

What You Can Use It For

Buying an existing building or land
Ground-up construction or major renovation
Long-life machinery and equipment (generally 10+ years of useful life)
Refinancing eligible fixed-asset debt in some cases

What it can't fund: working capital, inventory, or investment real estate. For those, look at an SBA 7(a) loan or other business financing.

The Owner-Occupancy Rule

Your business must occupy at least 51% of an existing building (60% for new construction). You can lease out the rest. If you plan to buy a building mostly to rent to others, a 504 isn't the right tool — see our commercial real estate loans instead.

General 504 Requirements

For-profit business operating in the U.S.
Tangible net worth under $20 million
Average net income under $6.5 million after taxes for the prior two years
Ability to repay from business cash flow, plus reasonable personal credit and management experience
SBA portion typically up to $5.5 million per project (larger total projects are possible with the bank piece)

Rates and Terms

The CDC portion carries a fixed rate tied to Treasury yields, with 10-, 20-, or 25-year terms. The bank portion is set by the lender and may be fixed or variable. Expect upfront SBA and CDC fees, which are usually rolled into the loan.

504 Loans in California

California has dozens of active CDCs and a large share of national 504 volume. High property values make the 10% down payment especially valuable here — on a $2.5M building, that's $250K down instead of the $500K–$750K a conventional loan often requires.

Figures reflect general SBA program guidelines and typical market practice. Requirements, rates, and timelines vary by lender and deal, and every loan is subject to underwriting and approval.

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California Business Capital | Fresno, California | info@cabizfunding.com | 559-549-4717

SBA 504 Loans Explained: Real Estate & Equipment Financing