How SBA 504 financing works
A 504 project is typically structured with three parts: a first-lien loan from a private lender, a second loan from a Certified Development Company (CDC) backed by an SBA-guaranteed debenture, and a contribution from the business. A common structure is approximately 50% lender, 40% CDC, and 10% borrower, though the borrower contribution can be higher for start-ups or special-purpose properties.
The CDC portion carries a fixed rate tied to U.S. Treasury rates, with 10-, 20-, or 25-year maturities available. 504 loans are available only through CDCs working alongside participating lenders.
SBA sets the maximum 504 debenture amount, and higher limits can apply to certain project types. The CDC and lender will confirm current program limits, fees, and rates.
Common business uses
- Purchasing an existing owner-occupied building or land
- Constructing new facilities or renovating existing ones
- Purchasing long-term machinery and equipment (generally with a useful life of at least 10 years)
- Refinancing qualified debt connected to eligible fixed assets, as allowed by SBA rules
General eligibility considerations
- An operating, for-profit business located in the United States that meets SBA size requirements
- Owner-occupancy: the business generally must occupy at least 51% of an existing building (60% for new construction)
- Qualified management, a feasible plan, and the ability to repay
- Not a nonprofit, passive, or speculative business
- Not available for working capital, inventory, or investment/rental real estate
Documentation lenders typically request
- Business federal tax returns (typically the most recent three years)
- Personal federal tax returns for owners with significant ownership
- Year-to-date profit and loss statement and balance sheet
- Personal financial statement for each owner
- Business debt schedule listing current obligations
- Business formation documents and ownership structure
- Résumés or management background for key principals
- Purchase contract or construction budget and plans
- Property information, appraisal, and environmental reports as required
- Equipment quotes and expected useful life where applicable
- Information requested by the CDC regarding the project and business
Requirements vary by lender and program. Please do not send tax returns or other sensitive documents through our website form — we will provide a secure method when documents are needed.
The role Sapphire Holdings plays
- Help determine whether your project appears to fit 504 program parameters
- Organize project costs, sources and uses, and supporting documentation
- Help prepare a clear presentation of your business and project for the lender and CDC
- Help coordinate communication among the business, lender, and CDC
Sapphire Holdings is not a lender and does not make credit decisions. The lender independently determines eligibility, rates, terms, and approval.