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SBA 504 Loan Program

The Small Business Administration (SBA) 504 loan is a fixed asset financing program which offers small businesses fixed interest loans at a below market rate. The SBA 504 stimulates local investment and creates new or saves existing jobs.

Capital Certified Development Corporation (non-profit), in conjunction with Texas Department of Commerce staff, acts as an intermediary between the business, the lender, and the SBA in the development process. Staff members will assist businesses in assessing their debt service capacity, structuring the financing, packaging, closing and servicing the loan.

Loan proceeds may be used to acquire land, construct a building, purchase land/building/and/or machinery and equipment.

Proceeds cannot be used for working capital or to refinance existing debt.

The program is available to successful small businesses planning an expansion. Eligible businesses with a three-year track record are desirable. The size criteria for a small business includes:

  • Any business whose tangible net worth is less than $6 million and whose profits after tax averaged under $2 million for the previous two years.
  • There are no limitations on the personal net worth of business owners.
  • Limited to owners-users; developers do not qualify.

 The 504 loan program is a dual program, which involves the SBA through a CDC and a private lending source. Private lenders make up the first mortgage loans for fifty percent (50%) of the SBA 504 project cost, using their normal credit terms. Generally, projects are between $200,000 and $2.5 million. The SBA through the CDC may finance forty percent (40%) of the SBA 504 total projects costs. The maximum CDC participation is $750,000.

The business must provide a minimum ten (10%) equity contribution although additional equity contributions may be required if the business is less than three years old.

SBA 504 loans are generally second mortgage loans for forty percent (40%) of the SBA 504 project cost (the CDC portion). The lending source is generally a bank, although seller financing may be an option in some instances. The rate charged on the private loan is set by the private lender and may be fixed variable or floating. The private lender subject to SBA term requirements also sets the term.

SBA 504 loans are usually subordinated to the private loan and are offered at an interest rate set at ¾ percent over the U.S. Treasury bond rate. The rate fluctuates with the market and is set once a month for loans that are closed once a month. When a loan is closed, the rate is fixed and remains constant over the life of the loan. The loan’s tem is tied to the life of the assets and is either 10 or 20 years.


SBA Disaster Assistance for Businesses in Response to COVID-19 Learn More