SBA 504 Loan Guide 2026: Requirements, Rates & How to Apply

By PMF LA | March 20, 2026 | SBA Loan Guides

For business owners looking to purchase commercial real estate or invest in heavy, long-lived equipment, the SBA 504 loan program is one of the most powerful financing tools available in 2026. With fixed interest rates, low down payments, and terms up to 25 years, SBA 504 loans are purpose-built for major fixed asset investments.

What Is an SBA 504 Loan?

The SBA 504 loan is a government-backed financing program that funds the purchase of major fixed assets — primarily commercial real estate and heavy equipment. Unlike the more flexible SBA 7(a) loan, the 504 program is specifically designed for capital investments that support business growth and job creation.

The program operates through a unique three-party structure:

Conventional lender (bank or credit union): funds 50% of the project cost
Certified Development Company (CDC): funds 40% of the project cost (backed by an SBA debenture)
Borrower (you): contributes as little as 10% down

SBA 504 Loan at a Glance

Maximum loan amount: $5 million ($5.5M for manufacturing or energy-efficient projects)

Down payment: As low as 10% (15% for startup businesses, 15% for special-use properties)

Terms: 10, 20, or 25 years for real estate; 10 years for equipment

Rates: Fixed; tied to U.S. Treasury rates — often below conventional commercial loan rates

What Can an SBA 504 Loan Be Used For?

Eligible uses include:

Purchasing land or an existing building
New construction or building improvements
Purchasing long-lived machinery or equipment (useful life of 10+ years)
Modernizing or converting existing facilities

SBA 504 funds cannot be used for working capital, inventory, or refinancing existing debt (with limited exceptions).

SBA 504 Loan Requirements

To qualify, your business must:

Be a for-profit business operating in the United States
Have a tangible net worth under $20 million
Have average net income after taxes of less than $6.5 million for the prior two years
Demonstrate the ability to repay the loan from projected cash flow
Meet the SBA's job creation/retention goals (typically 1 job per $75,000 of CDC financing)

Personal credit requirements are similar to the 7(a) program — typically 680+ for competitive approvals, though lower scores can be considered with strong business financials.

SBA 504 vs. SBA 7(a): Which Is Right for You?

The 504 is the better choice when you're specifically purchasing real estate or major equipment and want the lowest possible rate and longest terms. The 7(a) is more flexible — it can cover working capital, inventory, acquisitions, and more — but typically at higher rates and shorter terms for real estate.

For Los Angeles businesses specifically, the 504 program is particularly compelling for acquiring commercial property in a market where real estate values are high and locking in a fixed rate protects you from future rate increases.

Ready to Invest in Commercial Property or Equipment?

PMF LA specializes in navigating SBA 504 applications for businesses across the US and Canada. Our team handles the documentation, CDC coordination, and lender matching to streamline your path to funding.

Start Your SBA 504 Application

How Long Does SBA 504 Approval Take?

SBA 504 approvals typically take 45–90 days from application to closing. This is longer than many alternative financing options, but the rates and terms are often substantially better — making the wait worthwhile for major investments. Working with an experienced broker like PMF LA helps compress timelines by ensuring your application is packaged correctly the first time.