An SBA 504 loan splits financing into a bank first mortgage, a CDC second-position debenture, and borrower equity — each debt piece carrying a different rate that blends into one effective cost.
How it works
The standard structure finances 50% via bank loan and 40% via CDC debenture (10% borrower equity). Weighting each portion’s rate — with the CDC portion including its servicing fee — by its share of the financed amount gives the blended rate, then standard loan amortization gives the monthly payment.
What this does not include
This does not include SBA program fees (typically 2.5%-3.5% of the CDC portion, financed into the loan) or closing costs on the bank portion, both of which add to the total cost beyond the interest rate shown here.
How to use this calculator
- Enter total project cost, bank rate, CDC debenture rate, servicing fee, and loan term.
Frequently asked questions
How is a 504 loan different from a 7(a) loan?
A 7(a) loan is a single loan with one SBA guaranty fee; a 504 loan splits financing across a bank loan and a separate CDC debenture, each with its own rate, specifically for real estate and major equipment purchases.
Why does the CDC portion carry a servicing fee?
The Certified Development Company that issues the debenture charges an ongoing fee for administering the loan, which is added to the debenture rate to determine the borrower’s effective cost on that portion.
Can the 504 program be used for working capital?
No — 504 loans are restricted to fixed assets like real estate and heavy equipment, not working capital, which is more the domain of a 7(a) loan or a line of credit.
