The three-part structure
A conventional lender provides roughly 50% of the project as a first mortgage. A Certified Development Company - a non-profit licensed by the SBA - provides roughly 40% as a second lien funded by a debenture sold to investors. The borrower injects the remaining 10%, or 15-20% for a startup or a special-purpose property.
The CDC portion is what carries the fixed rate. It is set when the debenture is sold, not when you apply, which means the rate on that tranche is not knowable at application. The bank's first-mortgage portion is priced separately and conventionally.
What qualifies
Owner-occupied commercial real estate - the business must occupy at least 51% of an existing building, or 60% of new construction - and long-life machinery and equipment. Working capital, inventory, and debt refinancing are generally outside the programme, with a narrow refinance exception.
There is also a job-creation or public-policy requirement, usually expressed as one job created or retained per a set amount of the CDC portion. In practice most CDCs work with borrowers to satisfy it under an alternative public-policy goal.
504 versus 7(a) for real estate
For owner-occupied property, 504 usually wins on rate and on rate certainty, and it preserves more of the borrower's capital. 7(a) usually wins on speed and simplicity, and it can fund a mixed project - property plus working capital plus goodwill - in a single loan. A 504 cannot.
The practical decision often comes down to whether the deal has any non-real-estate component. If it does, one 7(a) is frequently simpler than a 504 plus a separate working capital facility.
Commonly used for
- Buying the building your business already operates from
- Ground-up construction for owner occupancy
- Heavy equipment with a long useful life
- Borrowers who need certainty of payment for two decades
What to check before signing
- The CDC rate is set at debenture sale, after approval - you do not lock it at application
- Two lenders and a CDC means more documents and a slower close
- Prepayment penalties on the CDC portion decline over roughly the first ten years
- Working capital and goodwill are generally not eligible uses
What the record shows
Real SBA numbers, not estimates
Every figure below is computed from the SBA's own loan-level file rather than from a lender's marketing.
Loans since FY2010
1,052,071
Median approval
$180,000
Median 7(a) rate
6.75%
Median term
10 yr
Source: U.S. Small Business Administration, SBA 7(a) and 504 FOIA data, as of 2026-06-30. Approvals from FY2010 onward. How we calculate this.
| Largest SBA lenders | Approved | Loans | Median loan |
|---|---|---|---|
| Live Oak Banking Company | $23.10B | 17,770 | $850,000 |
| The Huntington National Bank | $19.51B | 82,278 | $60,700 |
| Wells Fargo Bank | $17.43B | 56,773 | $25,000 |
| U.S. Bank | $10.67B | 43,737 | $40,000 |
| JPMorgan Chase Bank | $8.49B | 44,082 | $95,000 |
SBA 504: common questions
- What is a CDC?
- A Certified Development Company is a non-profit corporation licensed by the SBA to deliver the 504 programme in a defined region. The CDC underwrites the SBA portion, packages it, and services it after closing. Our lender pages include CDCs alongside banks.
- Is the 504 rate really fixed for 25 years?
- The CDC's second-lien portion is fixed for the full term. The bank's first mortgage - roughly half the project - is priced by the bank and may be fixed or variable with a shorter reset. It is common for borrowers to assume the whole project is fixed when only part of it is.
- How much do I need to put down?
- Usually 10% of total project cost. It rises to 15% if the business is less than two years old or the property is special-purpose, and 20% if both.