SBA 504 Loan Program

SBA 504

Long-term fixed-rate money for owner-occupied real estate and heavy equipment, with a lower down payment than a bank would ask on its own.

Use: Owner-occupied real estate and equipment; Fixed assets only
Rate: Long-term fixed on the CDC portion; Set at debenture pricing when the CDC portion funds
Structure: Bank + CDC + borrower equity; Three-party structure, which is why the equity requirement is lower
Not eligible: Working capital; 504 is a fixed-asset program

What SBA 504 actually is

The SBA 504 program splits a project between a conventional lender and a Certified Development Company, with the CDC portion carrying a long-term fixed rate. The structure exists to finance fixed assets — owner-occupied commercial real estate and long-life equipment — and it typically requires less borrower equity than a straight bank loan on the same property.

The thing that trips people up SBA's SOP 50 10 8, effective June 1, 2025, made merchant cash advances and factoring agreements ineligible for refinancing with 7(a) proceeds. Any broker still advertising an SBA refinance of MCA debt is describing something the rules no longer allow.

When it is the right tool

Buying the building your business already operates in
Ground-up construction for owner-occupancy
Heavy equipment with a long useful life
Owners who want a fixed rate they can hold for decades

When it is not

Working capital or inventory
Investment property the borrower will not occupy
Refinancing a merchant cash advance — see the note below

Why the three-party structure lowers your down payment

A 504 project is funded by a conventional lender in first position, a Certified Development Company in second, and the borrower's equity. Because the CDC portion sits behind the bank, the bank is lending against a smaller share of the property value than it would on a standalone loan — and that is what allows the borrower's equity contribution to come down. The CDC portion carries a long-term fixed rate set at debenture pricing when it funds.

The trade-off is process. Three parties means three sets of requirements and a longer close than a single-lender deal. If speed is the binding constraint, 504 is usually the wrong tool regardless of how attractive the rate looks.

The MCA refinancing rule, stated plainly

SBA's SOP 50 10 8, effective 1 June 2025, made merchant cash advances and factoring agreements ineligible for refinancing with 7(a) loan proceeds. The prohibition applies across Standard, Express, Export Express and International Trade loans. SBA's stated reasoning was that merchant cash advances — which sell future receivables at a steep discount on a demanding repayment schedule — do not align with the agency's objective of promoting sustainable, long-term business growth.

If you have been told otherwise A broker offering to refinance your merchant cash advance into an SBA loan is describing something the rules stopped permitting in June 2025. That is worth knowing before you pay anyone a fee to arrange it. We wrote up what actually changed and what options remain.

Where 504 fits against the alternatives

504 is a fixed-asset program: the building you occupy, or equipment with a long useful life. It will not fund working capital, and it will not fund investment property you do not occupy. If the project is a retrofit or conversion of a building you already own, C-PACE reaches things 504 does not and does not require occupancy. If the facility sits in a community under 50,000 people, USDA B&I can run terms longer still.

SBA 504 questions

Can an SBA loan refinance a merchant cash advance?

No. Under SOP 50 10 8, effective June 1, 2025, merchant cash advances and factoring agreements are not eligible for refinancing with 7(a) loan proceeds. The prohibition applies across Standard, Express, Export Express and International Trade loans. SBA's stated reason is that MCAs do not align with the agency's objective of promoting sustainable long-term business growth.

What is the difference between SBA 504 and SBA 7(a)?

504 is for fixed assets — owner-occupied real estate and long-life equipment — and carries a long-term fixed rate on the CDC portion. 7(a) is the broader program covering working capital, acquisitions and a wider set of uses, usually at a variable rate.

Do I have to occupy the building to use SBA 504?

Yes. 504 real estate financing requires owner-occupancy. Investment property held purely for lease income does not qualify.

Eligibility check

Is 504 the right structure for this purchase?

Send the property, the occupancy plan and your timeline. If 504 is too slow for your close, we will say so rather than start a process that misses.

Commercial and business purposes only — we do not place consumer loans.
If the project does not qualify, we say so and tell you what would change that.
No credit pull to get an answer on program eligibility.