Key takeaways
The 504 formula
Project cost = bank loan + CDC loan + owner equity
Typical split ≈ 50% bank + 40% CDC + 10% owner
Monthly payment (each loan) = P × r ÷ (1 − (1 + r)^−n)
P is the loan amount, r is the annual rate ÷ 12 and n is the number of monthly payments. Add the bank and CDC payments together for the total.
Worked example (illustrative numbers)
A business buys a building for its own operations. All numbers below are illustrative, not quotes.
- Illustrative project cost: $2,000,000
- Illustrative bank loan (50%): $1,000,000
- Illustrative CDC loan (40%): $800,000
- Illustrative owner equity (10%): $200,000
- Illustrative CDC payment at 6.50% over 25 years (300 months): about $5,402 per month
- Illustrative bank payment at 7.50% over 25 years (300 months): about $7,390 per month
- Illustrative combined payment: about $12,792 per month, before fees
Illustrative only. Real terms depend on the lender, the SBA and your file.
What a 504 loan can and cannot pay for
Per the SBA, 504 proceeds can be used for:
- Buying existing buildings or land
- New construction or renovating facilities
- Long-term machinery and equipment
- Refinancing certain debt tied to eligible fixed assets, under SBA conditions
Not allowed
504 loans generally cannot be used for working capital, inventory, consolidating or repaying unrelated debt, or speculative and investment real estate. If you need those, compare an SBA 7(a) loan.
How the process works
Most borrowers start with a bank or a CDC. The bank underwrites its first-lien loan, the CDC underwrites the second loan and the SBA approves the CDC portion. The bank often provides interim financing until the CDC portion funds after the project is complete.
Expect more paperwork than a conventional loan: appraisals, environmental reviews for real estate, and job-creation or public-policy goals the CDC documents.
Rates and fees (checked against sba.gov on November 1, 2026)
- Maximum SBA/CDC portion: the SBA lists $5.5 million (this is the CDC portion, not the total project).
- Terms: the SBA lists 10-, 20- and 25-year maturities for the CDC portion.
- CDC interest rate: fixed and pegged to an increment above the 10-year U.S. Treasury rate. It changes monthly, so we do not state a number here — see the SBA source.
- Fees: the SBA lists fees totaling approximately 3% of the debt, which may be financed with the loan. Ask for a written fee list.
Rates, caps and fees change. Check the official source before you rely on any figure: SBA.gov: 504 loans.
Common questions
What is an SBA 504 loan used for?
Major fixed assets: buying or building owner-occupied real estate, renovations and long-life equipment. It is not designed for working capital or inventory.
How much down payment does a 504 loan need?
Often about 10% of the project cost. Startups and special-purpose properties commonly need 15% to 20%. The lender and CDC set the final amount.
What is the current SBA 504 interest rate?
The CDC portion is fixed and tied to the 10-year Treasury, and it changes monthly. Check sba.gov or ask a CDC for the current rate rather than relying on a published number.
What is the maximum SBA 504 loan?
The SBA lists $5.5 million for the CDC portion as of November 1, 2026. Total projects can be larger because the bank loan and owner equity are added on top.
Can I use a 504 loan to buy a business?
Only the eligible fixed-asset part, such as the real estate. Goodwill and working capital are usually financed with a 7(a) loan or other sources.
Does Profit Theory make 504 loans?
No. Profit Theory, LLC is not a lender. A financing specialist can help you prepare and connect you with lenders and CDCs we select based on fit; they make all decisions.
Not sure this program fits?
A financing specialist can compare SBA options with your numbers and prepare a lender-ready package.
Build my financing planEstimates only. Results vary. No guarantee of approval, rates or savings.
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