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 25-year term 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.

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).