Long-term fixed rates for the property you operate from.
The 504 pairs a conventional first mortgage with an SBA debenture to finance owner-occupied real estate and heavy equipment — as little as 10% down, with a below-market fixed rate locked for the life of the SBA portion.
SBA 504 at a glance
- Below-market fixed rate on the SBA portion, locked for the term
- As little as 10% down on owner-occupied property
- Finance real estate and long-life heavy equipment
- 10, 20, and 25-year terms available
- High leverage preserves working capital
Ideal for: established owner-occupants buying, building, or expanding the property their business runs from — and businesses financing long-life equipment.
How the 504 structure works
A 504 is two loans working together: a conventional first mortgage covering roughly 50% of the project from a bank or our own capital, and a second loan of up to 40% funded through an SBA Certified Development Company and backed by a government debenture. You contribute the remaining 10%.
The payoff is the SBA portion: a long-term, fixed rate set when the debenture sells, typically below what a conventional loan of the same size would offer — and fixed for 10, 20, or 25 years. For an owner-occupant planning to hold the building, it removes interest-rate risk from the single largest line on the balance sheet.
Replacing rent with a mortgage payment
Most owner-occupants arrive at the 504 the same way: the lease is up, the renewal quote is higher than the last one, and the landlord has floated selling the building. Rent resets every few years and leaves nothing behind. A 504 turns the same monthly outlay into principal on an asset you control — at as little as 10% down, so making the switch doesn't drain the working capital the business runs on.
The comparison worth running isn't rent versus payment in year one. It's rent versus payment across the whole hold: your rent steps up at every renewal, while the SBA portion of a 504 is fixed for 10, 20, or 25 years, so the largest line on your balance sheet stops moving. Where the numbers land depends on the purchase price, the split between the first mortgage and the debenture, and the term you choose — we model it against your actual rent before you commit.
SBA rules require your business to occupy at least 51% of an existing building (60% for new construction), which leaves room to lease the balance, and that tenant income can offset a meaningful share of the payment. If your current landlord is the seller, that's usually the cleanest version of the deal: no marketing period, no competing buyers, and a seller who already knows the property's condition.
504 vs. 7(a) — which one fits
Both put as little as 10% down on owner-occupied real estate, but they solve different problems. The 504 is built for fixed-asset projects — real estate and heavy equipment — and delivers a long-term fixed rate. The 7(a) is more flexible, covering working capital and business acquisition the 504 can't touch, usually at a variable rate.
If your project is straightforward real estate or equipment and you want rate certainty, the 504 usually wins on cost. If you need to fold in working capital, inventory, or a business purchase, the 7(a) is the better tool. We run the file both ways and show you the all-in numbers before you choose.
SBA 504 questions, answered.
What's the difference between SBA 504 and 7(a)?
The 504 finances fixed assets — owner-occupied real estate and heavy equipment — with a long-term fixed rate. The 7(a) is more flexible, covering working capital, acquisition, and refinance, usually at a variable rate. We compare both on every eligible file.
How much down do I need for a 504 loan?
Typically 10% for an established business buying standard owner-occupied property. Special-purpose properties or start-ups may require 15–20%. The high leverage is a core advantage of the program.
What can a 504 loan finance?
Owner-occupied commercial real estate (purchase, construction, or improvement) and long-life heavy equipment. It cannot be used for working capital, inventory, or buying a business — that's 7(a) territory.
Is the 504 rate really fixed for the whole term?
The SBA debenture portion carries a fixed rate locked when it's funded, for 10, 20, or 25 years. The conventional first mortgage is negotiated separately and may be fixed or adjustable depending on the lender.
Can I use a 504 loan to buy the building my business rents?
Yes — that's a core use of the program. As long as your business will occupy at least 51% of an existing building, buying the space you already lease is a standard 504 project, whether the seller is your current landlord or a third party. You can lease out the remaining space.
Will a 504 payment be lower than my rent?
Sometimes, and sometimes not in year one — it depends on the purchase price, your injection, and the term. What changes is the direction of travel: rent resets upward at each renewal, while the SBA portion of a 504 is fixed for the life of the debenture, and each payment builds equity instead of disappearing. We model both against your current rent before you decide.
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