A fixed-asset financing in which a bank lends 50 percent or more, a certified development company funds up to 40 percent through an SBA debenture, and the borrower puts in at least 10 percent.
A 504 project finances fixed assets: land, buildings, equipment with a useful life of 10 years or more, site work and project soft costs. The usual split is 50 percent from a bank, 40 percent from the debenture and 10 percent from the borrower. A new business or a special purpose property raises the borrower’s share to 15 percent, and both together raise it to 20 percent.
The gross debenture is capped at $5,000,000 per borrower and affiliates, or $5,500,000 per project for small manufacturers and energy projects, and it cannot be less than $25,000. Terms are 10, 20 or 25 years. The debenture rate is set at the monthly sale from market yields.
A project must also meet an economic development objective, usually one job created or retained per $95,000 of debenture, or $150,000 for a small manufacturer. Example: a $2,000,000 project splits into $1,000,000 from the bank, $800,000 from the debenture and $200,000 from the borrower. For fiscal year 2027 the one-time SBA fee is 0.50 percent and the yearly fee 0.203 percent, waived for manufacturers, listed food supply chain businesses and rural businesses.
How it shows up in the data here
In the 504 file, GrossApproval is the SBA and development company portion, not the project cost. ThirdPartyLender_Name and ThirdPartyDollars name the bank and its first lien, and CDC_Name names the development company. This site counts a bank's 504 first liens over 36 months. The file holds no project cost and no borrower cash.
Go further
- SBA 504 lenders by projects: The banks named as third-party lenders, with the method printed above the table.
- SBA 504 structure calculator
- SBA 504 structure calculator: Bank loan, debenture and down payment for a project, and the fees that sit around them.
- SBA 504 loan package checklist: A 504 project has three parties, two loans and a closing date set by a monthly bond sale. Build the package for all three.
- SBA 7(a) or 504: which fits your loan: Both are SBA loans, and they work differently. The choice usually turns on what you are buying and how much cash you can put in.
- SBA Preferred Lenders Program and Express: how they differ: Some SBA lenders decide a loan on their own authority and some send it to SBA first. The difference changes who reads your file and who carries the risk.
Related terms
- Debenture (SBA 504): The bond a certified development company issues to fund SBA's share of a 504 project. SBA guarantees it in full, and debentures are normally sold once a month.
- Third-party lender (SBA 504): The bank or other lender that makes the first-lien loan, usually about half the project cost, in an SBA 504 project. SBA does not guarantee its loan.
- Certified development company (CDC): A lender certified by SBA to package, close and service 504 loans and to issue the debenture that funds up to 40 percent of a project.
- SBA 7(a) loan: SBA's main business loan program. A lender makes the loan and SBA guarantees part of it: up to 85 percent of $150,000 or less and 75 percent of more, on loans up to $5,000,000.
- SBA occupancy requirement: The rule that a business using SBA money on real estate must occupy at least 51 percent of an existing building, or 60 percent of a new one, and may lease out the rest within set limits.
Sources
Plain definitions for orientation, not legal, tax or credit advice. A lender's own policy decides what it will do.