SBA 504 Loan Calculator
Calculate your blended monthly payment on an SBA 504 loan. The 504 structure splits the project cost between a CDC fixed-rate second mortgage and a bank first mortgage, producing a below-market blended rate.
How the SBA 504 Structure Works
An SBA 504 loan is not a single loan. It is a financing structure with two separate loans and your equity:
- Bank first mortgage (up to 50%): A conventional loan from a participating bank. The rate, term, and fees are negotiated directly with the bank. This portion often carries a variable rate (Prime + spread).
- CDC/SBA second mortgage (up to 40%): Funded through an SBA-guaranteed debenture issued by a Certified Development Company. The rate is fixed for the full term and is typically well below conventional rates because the SBA guarantee reduces the CDC's risk.
- Borrower equity (minimum 10%): Your cash contribution. Startups and special-use properties may require 15%-20%.
The blended rate shown in the results is the weighted average of the CDC and bank portions. Because 40% of the project is financed at a below-market fixed rate, the blended rate is lower than what a single conventional loan would cost.
Understanding CDC Rates and Fees
The CDC effective rate has three components:
- Debenture rate: Set at each monthly SBA debenture sale, based on the 5-year or 10-year Treasury rate plus a small spread. This is the base rate.
- CDC servicing fee: Typically 0.625% annually, added to the debenture rate to produce the effective borrower rate.
- SBA guarantee fee and CDC processing fee: Approximately 2.15% combined, paid at closing or financed into the loan.
When a CDC quotes you a rate, it typically includes the debenture rate plus the servicing fee. Enter that quoted rate in the "CDC Fixed Rate" field. Enter the guarantee and processing fees separately in the "CDC/SBA Fees" field.
When SBA 504 Makes Sense
Best for: Purchasing commercial real estate, constructing owner-occupied buildings, or acquiring heavy equipment with a useful life of 10+ years. The fixed-rate CDC portion provides rate certainty on a large share of the project.
Less ideal for: Working capital, inventory, or short-term needs. The 504 program is specifically designed for long-term fixed assets. If your primary need is not real estate or major equipment, an SBA 7(a) loan offers more flexibility.
The rate advantage: In the current rate environment, the CDC fixed rate can be 2-4 percentage points below conventional bank rates. On a $1M project, that translates to meaningful monthly savings and significantly lower total interest over the life of the loan.
SBA 504 loans require a CDC partner and a participating bank. Tell us about your project and we will connect you with both.
See If Your Project Qualifies for 504Frequently Asked Questions
What is the current SBA 504 CDC rate?
The CDC effective rate is set at each monthly SBA debenture sale. It changes monthly based on Treasury rates. Contact a Certified Development Company (CDC) in your area for the current rate, or check SBA.gov for the latest debenture rate. The effective borrower rate is the debenture rate plus the CDC annual servicing fee (typically 0.625%).
Can the bank portion have a fixed rate?
Yes. While many banks offer variable rates on their 504 first mortgage, some offer fixed rates. If your bank offers a fixed rate, enter it in the calculator. The blended result will reflect two fixed portions, which gives you complete rate certainty on the entire project.
Why is the CDC term different from the bank term?
The CDC portion is funded through SBA debentures with standardized terms: 10 years for equipment, 20 years for real estate, and 25 years for real estate with a useful life over 10 years. The bank sets its own term independently, typically 10-25 years. Having different terms is normal for 504 loans. The calculator handles this correctly by computing each portion separately.
What are the equity requirements?
Standard minimum is 10% of the total project cost. Startups (businesses operating less than 2 years) and special-use properties (single-purpose buildings like gas stations or car washes) require 15%. A startup acquiring a special-use property requires 20%.
How does the 504 compare to a straight conventional loan?
The calculator shows this comparison in the results. Because 40% of the project is financed at the CDC's below-market fixed rate, the blended cost is lower than a single conventional loan at the bank's rate. The tradeoff: 504 loans involve more paperwork, two closings, longer processing time (60-90 days typical), and strict eligibility rules (owner-occupied, job creation or community benefit). If speed matters more than cost, a conventional loan may be the better fit.
Are the CDC fees added to my loan or paid at closing?
Both options are available. The SBA guarantee fee and CDC processing fee (approximately 2.15% combined) can be financed into the CDC loan amount or paid out of pocket at closing. This calculator treats them as a separate cost item so you can see the impact either way. Ask your CDC which approach they recommend for your situation.
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