We believe everyone should be able to make financial decisions with confidence. And while our site doesn’t feature every company or financial product available on the market, we’re proud that the guidance we offer, the information we provide and the tools we create are objective, independent, straightforward — and free.
So how do we make money? Our partners compensate us. This may influence which products we review and write about (and where those products appear on the site), but it in no way affects our recommendations or advice, which are grounded in thousands of hours of research. Our partners cannot pay us to guarantee favorable reviews of their products or services. Here is a list of our partners.
SBA 504 Loans: What Businesses Qualify and How to Apply
SBA CDC/504 loans fund real estate or equipment purchases or upgrades. They’re backed by the U.S. government.
Personal finance expert | Small business lending, SBA loans, Paycheck Protection Program, consumer spending, and household finances
Kelsey Sheehy is a NerdWallet authority on small business. Her work has appeared in The New York Times, USA Today and The Associated Press, where she writes a column about millennials and money. Kelsey has appeared on the <a href="https://www.today.com/video/christmas-in-july-sales-to-take-advantage-of-now-64075333536">"Today"</a> show, <a href="https://www.nbcnews.com/nightly-news/video/tax-code-changes-leave-many-americans-with-unhappy-returns-1440385091860">NBC News</a> and <a href="https://abcnews.go.com/WNT/video/cost-smartphones-reaching-time-high-54166111">"ABC World News Tonight"</a> and has been quoted by the Los Angeles Times, CNBC and MarketWatch, among other publications. Email: <a href="mailto:firstname.lastname@example.org">email@example.com</a>.
Ryan Lane is an editor on the small-business team and a NerdWallet authority on student loans. He spent more than a decade as a writer and editor for student loan guarantor American Student Assistance and was a managing editor for publisher Cell Press. Ryan’s work has been featured by The Associated Press, USA Today and MarketWatch, and he previously co-authored the U.S. News & World Report Student Loan Ranger blog. Email: <a href="mailto:firstname.lastname@example.org”">email@example.com</a>.
Many or all of the products featured here are from our partners who compensate us. This influences which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. Here is a list of our partners and here's how we make money.
SBA 504 loans offer affordable financing for large equipment or real estate-related purchases. With terms as long as 25 years and financing of up to $5.5 million, 504 loans are an ideal option for small-business owners who want to make big purchases — as long as they can qualify and afford to wait for funding.
Here's how the SBA 504 loan program works, who qualifies and how to apply.
What is an SBA 504 loan?
SBA 504 loans, also known as CDC/504 loans, are small-business loans offered by Certified Development Companies and backed by the federal government. SBA 504 loans are one of the three core U.S. Small Business Administration loan programs, which also include 7(a) loans and microloans.
SBA 504 loans provide long-term financing (up to 25 years) for major business purchases like real estate or machinery. Loans are typically capped at $5 million, but some projects can qualify for up to $5.5 million.
To get an SBA 504 loan, you'll need to find a Certified Development Company. These nonprofit economic development organizations will process your application, coordinate your financing and submit the loan package to the SBA. You can find a list of CDCs on the SBA’s website.
Once you’ve identified a CDC, you’ll need the following documents to apply for an SBA 504 loan:
Business and personal tax returns for the last three years.
Business and personal financial statements.
Accounts payable and receivable.
Contractor estimates (for construction loans).
Cost documentation (for equipment loans).
This list isn't exhaustive, and the CDC and bank you work with may require additional documentation to process your 504 loan application.
If your application is approved, SBA 504 loans typically take one to two months to close. But closing can take longer for larger and more complex purchases.
SBA 504 loans are a great choice for funding major facility improvements or equipment purchases, but they don’t make sense for every business owner.
If you need faster funding:SBA Express loans offer quicker approval times than 504 loans but have lower borrowing maximums (just $500,000). If that amount isn’t enough for you, consider other fast business loans, like a business line of credit.
If your expenses don’t qualify: You can’t use a 504 loan for working capital or to purchase inventory. An SBA 7(a) loan may be a better fit in those instances, provided you can meet the eligibility requirements.
We’ll start with a brief questionnaire to better understand the unique needs of your business.
Once we uncover your personalized matches, our team will consult you on the process moving forward.
Frequently Asked Questions
There are two key differences between SBA 504 and SBA 7(a) loans: how they can be used and how they’re funded.
SBA 7(a) loans can be used for a wide variety of expenses, including working capital, purchases of supplies or fixtures and refinancing business debt. SBA 504 loans, on the other hand, are designated for large equipment or facility purchases or upgrades. You can't use an SBA 504 loan for working capital or inventory.
Unlike SBA 7(a) loans, which are funded by a bank or credit union, funding for an SBA 504 loan comes from three sources: a Certified Development Company (40%), a bank or credit union (50%) and the small-business owner taking out the loan (10%). Under certain circumstances, business owners may need to put down as much as 20%.
It typically takes several months from the time you apply for an SBA 504 loan to when your loan is funded. That time frame can stretch as long as six months for more complex projects, such as real estate purchases.