The 504 Loan Program, also known as the Certified Development Company (CDC) 504 Loan Program, is a U.S. Small Business Administration (SBA) initiative designed to provide long-term financing for small businesses to acquire, improve, or expand real estate and major fixed assets, such as equipment or machinery. This program helps stimulate economic development and job creation. Here’s a detailed explanation of the 504 Loan Program:

Structure of the 504 Loan Program:

The 504 Loan Program involves a three-party partnership:

  1. Borrower: The small business that intends to use the loan for acquiring or improving fixed assets, such as real estate or equipment.
  2. Certified Development Company (CDC): A nonprofit organization certified by the SBA to provide 504 loans. CDCs work with participating lenders and facilitate the approval, disbursement, and servicing of 504 loans.
  3. Third-Party Lender: A conventional lender (typically a bank or credit union) that provides a portion of the project financing. This lender has a first lien on the collateral and typically finances 50% of the project cost.


Key Components and Features:

  1. Loan Structure: The 504 Loan Program typically involves three components:

  2. Eligibility Criteria: To qualify for the 504 Loan Program, businesses must meet the SBA’s size standards, be for-profit entities, and have a net worth of $15 million or less and an average net income of $5 million or less over the previous two years. The project must create or retain jobs, promote community development, or meet certain public policy goals.

  3. Use of Funds: 504 loans can be used for:

  4. Interest Rates: Interest rates for the 504 Loan Program are typically fixed, making it easier for borrowers to budget for their long-term financial commitments.

  5. Loan Terms: Loan terms can vary based on the type of asset and the intended use. Real estate loans typically have a term of 10 to 20 years, while equipment loans usually have a 10-year term. The specific terms will be outlined in the loan agreement.

  6. Fees: Borrowers may be responsible for certain fees, such as the SBA guarantee fee, CDC processing fee, and appraisal and closing costs.

  7. Collateral: The project assets serve as collateral for the 504 loan, and the SBA takes a subordinate position to the third-party lender.

  8. Job Creation/Retention: The project financed by a 504 loan must meet specific job creation or retention criteria. For instance, the SBA may require that for every $65,000 of the loan, the project must create or retain one job.

  9. Economic Development: The 504 Loan Program is often used to promote economic development in underserved or distressed areas.

  10. Application Process: Small businesses work with their chosen CDC and a third-party lender to apply for the 504 loan. The CDC typically handles the processing and servicing of the loan.


The 504 Loan Program offers small businesses the opportunity to secure long-term, fixed-rate financing for the acquisition, construction, or renovation of fixed assets. It’s a valuable resource for businesses looking to invest in property and equipment while promoting economic development in their communities. For detailed guidance and assistance in navigating the 504 Loan Program, please contact Obelisco Advisers experts. They can provide tailored advice and support for your specific financing needs.


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Last updated: [August 7, 2023]

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