504 Small Business Administration Loan

The 504 loan program, originally created in 1986, provides long-term, fixed rate financing to small businesses at favorable rates for fixed asset acquisitions as a means to foster economic development and create and preserve jobs in urban and rural areas.

How Load Works


A bank or other financial institution finances 50% of the costs and takes a first mortgage (lien) position on the assets financed.
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The 504 loan is typically 40% of the project costs, up to a cap. This 504 loan is brought to the borrower through the efforts of a Certified Development Company (CDC). CDCs are regional economic development organizations licensed by the U.S. Small Business Administration (SBA). The CDC makes the loan under the SBA 504 loan program to assist small businesses. The CDC processes, approves, closes and services the loans and in all ways is the local advocate for the business with this loan program.

With the financing provided from the bank and the 504 loan, owners typically are required to inject 10% equity to proceed with their fixed asset investment.

Advantages of SBA 504 Over Conventional Financing


  • Low down payment - just 10%. Lets you preserve your cash for your working capital. In Ohio, many banks will lend only 75-80% of the appraised value of the project leaving you to contribute 20-25%.
  • Fixed rate on the SBA 504 loan. You don't have to worry about the prime lending rate going up. You can plan for the future because you know the amount of your mortgage payments for the next 20 years.
  • Long term - CDC 504 loans are for 10 or 20 years. Because the CDC is in second lien position, the bank or other lender doing the 50% first lien loan are willing to lend at a longer term, and longer terms makes you monthly payments lower.
  • Low Interest rate. Even with the fees and closing costs included in the rate (as many are financed in with the loan), it is still a low rate for a subordinate mortgage loan, particularly for small business. The blended rate between the bank portion and the CDCs 504 loan improve the affordability for you.
This loan program is very popular with small businesses and local financial institutions, and is also convenient because it is administered locally.

CDCs in Area


Warren County has established the CDC of Warren County and this is one of the many CDCs operating in the State of Ohio and here in the southwestern part of the state which is authorized to make such loans. To see a full listing of all of the CDCs in your area, go to Ohio CDC Association.

The maximum 504 loan amount allowable from the SBA is $1,500,000, however the loan cap can be exceeded and up to $4,000,000 is available under certain conditions. Ask a CDC for more information.

Loan Requirements


The 504 loan is made available to small businesses and requires a commitment to create or retain 1 job for every $50,000 (1 for $100,000 if a small manufacturer) within 2 years of the funding of the loan. Also, it is important to note that a 504 loan will require the personal guaranty of owners or shareholders of 20% or more of the company.

Finally, in some cases the SBA 504 loan can be made in conjunction with financing made available from the State of Ohio. For a full description of the program and other terms and conditions not detailed here, please contact a CDC or you may wish to visit the SBA website for more information.