SBA 504 Loan

Beyond the 7(a) program, the SBA offers loans specifically for owner- occupied real estate or long-term equipment purchases. These loans, called 504 loans, are actually composed of two different loans: one from a Certified Development Company (CDC) for up to 40% of the loan amount and one from a bank for 50% or more of the loan amount. You, as a borrower, will be responsible for putting at least 10% as a down payment. The CDC portion of the loan can go up to $5 to $5.5 million, meaning the entire project being financed can be upwards of $10 million or more. Interest rates on the CDC loans are based on U.S. Treasury rates and are fixed once you get the loan. Throughout 2017, these rates have fluctuated between 4% and 5%. The interest rates on the bank loan are typically variable. If you’re using the loan to purchase real estate, the maximum term is 20 years. Like the 7(a) loans, these loans are fully amortized.