SBA 504 loan

Definition

The SBA program for real estate and heavy equipment, not the business.

Why It Matters

If the deal comes with real estate, the 504 and 7(a) pairing can change the whole structure: the 504 carries the property at a fixed rate over a term of up to 25 years while the 7(a) covers the business and goodwill. Splitting the financing this way often lowers the blended rate and frees 7(a) capacity, so it is worth pricing whenever a building is part of the purchase. Since July 2026 a 7(a) balance no longer counts against the 504's own limit, so the pair can reach $10 million of SBA-backed financing on one project. The 504 cannot finance goodwill, so it never buys the business alone, and in a purchase it needs jobs kept or created, the buyer owning all of the business, and the seller gone as an officer, director, stockholder or key employee.

In numbers: A $1.5M owner-occupied building under 504 commonly splits 50% bank first mortgage, 40% CDC debenture, and 10% borrower equity ($150k), with the debenture at a long fixed rate; the operating business is financed separately, often under 7(a).