SBA 504 real estate loans: requirements (2026)
How SBA 504 real estate loans work: the 50/40/10 structure, 10% to 20% down, 51% and 60% occupancy, debenture limits and the jobs rule (SOP 50 10 8.1).
Published · 9 min read · By the AceTheSBA team
Key points
- A 504 loan finances owner-occupied real estate and long-life equipment in three parts: a bank loan of at least 50%, a fixed-rate CDC loan of up to 40%, and at least 10% from you.
- Your contribution is 10%, rising to 15% for a new business or special-purpose property, and 20% if both apply.
- The business must occupy at least 51% of an existing building or 60% of new construction.
- The CDC (debenture) portion is limited to $5 million, or $5.5 million per project for small manufacturers and energy projects.
- Each project must create or retain one job per $95,000 SBA guarantees ($150,000 for small manufacturers), or meet a community development or public policy goal.
The SBA 504 program exists to help small businesses own the buildings and major equipment they operate from, with a long-term fixed rate on a large part of the cost. It works differently from a 7(a) loan, and its rules are set out in Section C of SOP 50 10 8.1 and in 13 CFR Part 120.
The 50/40/10 structure
| Part | Share of project | Who provides it |
|---|---|---|
| Third-party loan | At least 50% | A bank or other lender, with a first lien |
| 504 loan (debenture) | Up to 40% | A Certified Development Company (CDC), funded by an SBA-guaranteed debenture at a fixed rate |
| Borrower contribution | At least 10% | You |
The bank loan must be at least as large as the CDC’s net debenture. Its term must be at least 7 years when the 504 loan is 10 years, and at least 10 years when the 504 loan is 20 or 25 years.
Your contribution
| Situation | Minimum contribution | CDC share at most |
|---|---|---|
| Standard project | 10% | 40% |
| New business (two years or less) or limited or special-purpose property | 15% | 35% |
| New business and special-purpose property | 20% | 30% |
Special-purpose properties are buildings designed for one kind of use, such as hotels, car washes or bowling alleys. Your contribution can be borrowed if it is subordinate to the bank loan and the debenture and is not repaid faster than the 504 loan.
Occupancy rules
- Existing building: the business occupies at least 51% of the rentable property and may lease up to 49%.
- New construction: the business occupies at least 60%, may permanently lease up to 20%, and may temporarily lease another 20% if it plans to use some within 3 years and all within 10.
Rentable property excludes stairways, elevators and mechanical areas. Rental income from tenants can be included in global cash flow but not in the core repayment analysis, and loan proceeds cannot improve space leased to others. A common structure has a real estate holding company (an Eligible Passive Company) own the building and lease 100% of it to the operating business.
Limits and terms
- Debenture: at least $25,000 and at most $5,000,000 outstanding for a business and its affiliates. Small manufacturers (NAICS 31 to 33, all production in the U.S.) and eligible energy public policy projects may have up to $5,500,000 per project.
- Total project: SBA does not cap the bank’s share, so total projects can be larger than the debenture limit.
- Term: the debenture runs 10, 20 or 25 years: up to 25 for real estate, at least 10 for machinery and equipment. When a project mixes both, the asset making up most of the proceeds sets the term.
- Rate: fixed, set when the debenture is sold, at an increment above the 10-year U.S. Treasury rate.
Eligible costs
- Land and land improvements
- Buildings, construction and renovation
- Machinery and equipment with a useful life of at least 10 years
- Furniture and fixtures, if a minor part of the project
- Professional fees directly attributable to the project
- Interim financing costs
- A construction contingency of no more than 15%
Not eligible: working capital, inventory, investment or speculative real estate, and costs not directly attributable to the project.
The jobs requirement
Each project must create or retain one job opportunity per $95,000 of SBA-guaranteed debenture, or per $150,000 for small manufacturers and energy projects. A job opportunity is a full-time-equivalent permanent job created within two years, or retained because of the loan. Alternatively, a project can meet one of the community development or public policy goals listed in 13 CFR 120.862, if the CDC’s portfolio of 504 loans meets its required job average. Your CDC can tell you whether a goal applies.
How to apply
- Find a CDC that serves your area; it will help you find a bank partner (or work with yours).
- Build a project budget with quotes, contracts or the purchase agreement.
- Calculate your contribution at 10%, 15% or 20%.
- Gather three years of business financial statements and tax returns, a personal financial statement and last year’s tax return for each 20% owner and guarantor, and projections if you are new or expanding.
- Complete SBA Form 1244 with your CDC.
This article reflects SBA SOP 50 10 8.1, effective October 1, 2026, and 13 CFR Part 120. CDCs and lenders may set requirements above SBA’s minimums.