SBA Certified Development Companies help small businesses finance owner-occupied commercial real estate, construction and long-term equipment. This guide explains the 504 loan structure, maximum loan amounts, terms, equity, application process, feasibility-study requirements and how to find every authorized CDC in the United States.
Preparing a 504 application? Start with our SBA 504 Feasibility Study Guide — what CDCs and lenders actually require.
Businesses purchasing real estate, constructing a new facility or acquiring major equipment frequently encounter a financing problem: conventional lenders may require a large down payment, offer a short amortization period or decline to finance specialized assets.
The SBA 504 Loan Program addresses this problem through a partnership between a private lender, a Certified Development Company and the borrower. The program provides long-term financing for owner-occupied commercial real estate, construction, improvements and qualifying equipment.
Certified Development Companies, commonly known as SBA CDCs, are central to the program. They help borrowers structure the financing, determine eligibility, prepare the SBA application, close the government-backed portion of the transaction and service the loan after closing.
This guide explains how CDCs work, how much can be borrowed, available loan terms, required borrower contributions, how to apply, when a feasibility study may be needed and where to find every SBA-authorized CDC in the United States.
An SBA Certified Development Company is a nonprofit corporation certified and regulated by the U.S. Small Business Administration to participate in the 504 Loan Program.
CDCs are not conventional banks. Their purpose is to promote local and regional economic development by helping eligible small businesses finance long-term fixed assets. SBA describes CDCs as responsible for packaging, processing, closing and servicing 504 loans.
A CDC generally performs the following functions:
A CDC does not normally finance the entire project. Instead, it works with a private lender to create a two-loan structure.
A typical SBA 504 transaction has three sources of funding:
| Financing source | Typical share | Normal lien position |
|---|---|---|
| Bank or other third-party lender | Approximately 50% | First lien |
| CDC/SBA 504 loan | Up to approximately 40% | Second lien |
| Borrower contribution | At least 10% | Equity |
The borrower applies through a CDC serving the area where the project is located. The bank or credit union provides the first mortgage, while the CDC provides the second portion using proceeds from an SBA-guaranteed debenture sold to investors. The SBA guarantees the debenture rather than the bank’s first mortgage.
A qualifying $10 million real-estate and equipment project might be structured as follows:
The borrower signs separate permanent obligations for the first-mortgage loan and the CDC/SBA loan. The two loans may have different interest rates, maturity provisions, payment schedules and prepayment terms.
The SBA-backed debenture is generally funded after the eligible project assets are acquired or construction is completed. New construction and major renovation projects therefore usually require interim financing.
An interim lender advances funds during construction. After completion, documentation and final cost verification, the CDC debenture is sold and the proceeds pay down the designated portion of the interim loan.
This makes early coordination essential. The bank, CDC, contractor, appraiser and environmental consultant should understand the financing structure before construction begins.
SBA 504 financing is intended for major fixed assets that promote business growth and economic development.
Eligible uses may include:
Long-term equipment generally must have a remaining useful life of at least 10 years.
Common SBA 504 projects include manufacturing facilities, hotels and motels, medical and dental offices, veterinary facilities, warehouses, distribution centers, childcare facilities, restaurants, gas stations and convenience stores, car washes, assisted-living facilities, self-storage facilities, food-processing plants, office buildings occupied by the borrower, and heavy machinery and production equipment.
SBA 504 proceeds generally cannot be used for:
Businesses needing working capital in addition to the fixed-asset financing may consider a separate conventional line of credit or SBA 7(a) loan, subject to the lenders’ approval and SBA’s cumulative-loan rules.
The SBA 504 loan amount refers to the CDC/SBA debenture portion—not necessarily the total project cost.
The standard outstanding SBA 504 limit is generally $5 million for a borrower and its affiliates.
The maximum can increase to $5.5 million per qualifying project for:
The SBA 504 loan generally cannot exceed 40% of eligible project cost, although applicable rules permit exceptions under limited circumstances. The regulatory minimum 504 loan is $25,000.
The maximum applies to the CDC/SBA portion. It is not necessarily a maximum total project size.
For example, a project may include a $5 million SBA 504 debenture, a larger first-mortgage loan, a substantial borrower contribution, and eligible grants or subordinate financing.
The total project cost can therefore exceed the SBA debenture limit, provided the overall capital structure, repayment ability, lien positions and eligible costs comply with program requirements.
Effective July 4, 2026, SBA announced that qualified borrowers may combine 7(a) and 504 financing for up to $10 million in SBA-backed financing. SBA described an example in which a borrower receives up to $5 million through 7(a) and up to $5 million through 504.
This can be useful when a business needs SBA 504 financing for real estate and long-term equipment, and SBA 7(a) financing for working capital, inventory, shorter-life equipment or other eligible business costs.
The two loans must finance separately documented costs. The lenders must evaluate the combined debt service and approve the complete collateral and financing structure. See our guide to the combined 7(a)/504 $10 million limit, and—for projects that also involve USDA financing—combining USDA B&I and SBA loans.
The CDC/SBA portion offers:
The CDC portion’s interest rate is set through the SBA debenture process and is tied to the market for U.S. Treasury securities. The effective borrower rate also incorporates applicable program and servicing fees.
The first-mortgage lender determines its interest rate, amortization and maturity subject to SBA requirements.
The first mortgage may have a fixed or variable interest rate, a term shorter than the SBA 504 portion, a different amortization schedule, a balloon payment, and separate lender and closing fees.
Borrowers should evaluate the blended payment and the refinance risk associated with the first mortgage rather than reviewing only the CDC’s quoted fixed rate.
A borrower may prepay the 504 loan, but the borrower must pay the outstanding principal, accrued interest, unpaid fees and any applicable prepayment premium. The premium generally declines according to the debenture’s prepayment schedule.
The standard borrower contribution is at least 10% of eligible project cost.
However, the contribution may be higher for:
Many projects involving either a new business or a special-purpose property are structured with a contribution closer to 15%. Projects combining both characteristics may require approximately 20%. The exact percentage must be confirmed by the CDC under the current SOP and the lenders’ underwriting policies.
Examples of properties that may receive limited- or special-purpose treatment include hotels, gas stations, car washes, certain healthcare facilities, assisted-living properties and other buildings designed for a narrow use.
An applicant generally must:
Nonprofit, passive and speculative businesses generally do not qualify.
For an existing building, the borrower generally must permanently occupy and use at least 51% of the rentable property.
For new construction, the borrower must initially occupy and use at least 60%, may permanently lease up to 20%, and must plan to occupy additional space as the business grows.
A 504 loan is therefore not intended for a business that primarily purchases buildings to lease them to unrelated tenants.
Prepare a preliminary project description that identifies the property or equipment, purchase or construction cost, renovation and installation costs, proposed business use, amount of cash available, expected employment, requested closing date, and working-capital needs outside the 504 project.
A complete sources-and-uses schedule should distinguish eligible fixed-asset costs from working capital and other ineligible expenses.
SBA 504 applications are available exclusively through authorized CDCs. A business may contact a CDC directly or begin with a bank experienced in SBA 504 lending.
The initial discussion should cover the geographic service area, preliminary borrower eligibility, eligible project costs, required contribution, special-purpose classification, estimated CDC loan amount, first-mortgage lender requirements, feasibility-study expectations, environmental and appraisal requirements, and the anticipated processing and closing steps.
A bank, credit union or other qualified third-party lender normally provides at least as much financing as the CDC loan and receives the first lien on project property.
Some CDCs maintain relationships with numerous banks and can help the borrower identify potential first-mortgage lenders. The borrower may also bring an existing banking relationship to the transaction.
The CDC and first lender will typically request:
SBA Form 1244 is the principal borrower-information form completed by the applicant and CDC for a 504 submission.
The bank evaluates the first mortgage, while the CDC evaluates the SBA portion and overall project.
The underwriting will consider historical and projected cash flow, global repayment ability, management experience, industry and market conditions, borrower contribution, collateral, construction risks, appraised value, environmental conditions, job creation or public-policy benefits, credit history, affiliate debt, and combined loan payments.
After the CDC completes its review, it submits the application under its applicable SBA authority. Approval may contain conditions that must be satisfied before closing or debenture funding.
An SBA authorization is not the same as final funding. The borrower must still satisfy the lenders’ closing conditions.
For construction or delayed-acquisition projects, an interim lender generally funds eligible costs until the CDC debenture can be issued.
The borrower must document every project expenditure and source of funds.
After completion, the CDC verifies eligible project costs, borrower equity, lien documents, insurance, appraisal, environmental compliance and other closing conditions.
The debenture is then sold, and the proceeds establish the permanent CDC/SBA loan.
A separate independent feasibility study is not automatically required for every SBA 504 loan.
SBA’s public eligibility requirements state that an applicant must have a feasible business plan and demonstrate repayment ability. SBA’s current SOP governs the underwriting and documentation used by CDCs and participating lenders.
The CDC or first-mortgage lender may nevertheless require an independent SBA 504 feasibility study when historical results do not provide sufficient evidence that the project can repay the proposed debt.
Expect closer scrutiny when a transaction involves:
The lender or CDC—not the consultant or borrower—ultimately determines whether a study is required and what it must include.
A lender-ready study should evaluate the complete project, including the first mortgage and CDC debt.
The market analysis should evaluate target customers, market size, geographic service area, demand drivers, competitive facilities, pricing, existing and planned supply, market penetration, ramp-up or absorption, customer commitments, and industry risks.
For a construction project, the study should review site suitability, zoning and permits, utilities, facility design, the construction budget, contractor qualifications, the construction schedule, contingency, equipment specifications, installation and commissioning, and operating capacity.
The financial analysis should reconcile total project cost, the first-mortgage loan, the CDC/SBA loan, the borrower contribution, other financing, construction interest, working capital, startup losses, revenue and operating expenses, debt-service coverage, the break-even point, and base and downside scenarios.
The report should determine whether the ownership and management team has sufficient experience to complete the project, control construction costs, operate the business, recruit employees, generate projected sales, manage debt, and meet regulatory requirements.
Usually, one properly scoped feasibility study can support both the CDC and first-mortgage lender.
The consultant should obtain the proposed scope from both parties before beginning work. The report should analyze the entire capital structure, not only the CDC portion. A bank-specific addendum may be necessary when the first lender uses different debt-service, stress-testing or market-analysis standards.
Separate studies may be required when:
The most reliable national directory is SBA’s own searchable list:
Official National List of Certified Development Companies
The directory allows users to select a state or territory and provides, where published, the CDC name, office address, telephone number, email address, website, and the state or territory served.
SBA states that 504 loans are available exclusively through CDCs and that its directory lists authorized organizations alphabetically and by state or territory.
Federal regulations allow a CDC to request an application deposit of no more than $2,500 or 1% of net debenture proceeds, whichever is less. The deposit may be applied to processing costs and must generally be refunded when an application is denied, subject to the applicable rules.
An SBA CDC acts as the borrower’s principal guide for the government-backed portion of an SBA 504 transaction. It evaluates eligibility, structures the CDC loan, coordinates with the first-mortgage lender, prepares the SBA submission, closes the debenture and services the loan.
The typical transaction combines approximately 50% first-mortgage financing, up to 40% CDC/SBA financing and at least 10% borrower equity. The CDC portion can generally reach $5 million, or $5.5 million for certain manufacturing and energy projects, with available maturities of 10, 20 and 25 years.
A feasibility study is not mandatory for every application, but it can become essential when a project depends on projections, involves construction, serves a new market or uses a special-purpose facility. Borrowers should ask the CDC and first lender to approve the study’s scope before commissioning the report.
An SBA Certified Development Company is a nonprofit corporation certified and regulated by SBA to package, process, close and service loans under the SBA 504 Loan Program.
The permanent CDC loan is funded through an SBA-guaranteed debenture sold to investors. A separate bank or third-party lender normally provides the first mortgage.
The standard CDC/SBA loan limit is generally $5 million. Certain small-manufacturing and qualifying energy projects may receive up to $5.5 million per project.
A standard project is commonly structured with approximately 50% first-mortgage financing, up to 40% CDC/SBA financing and at least 10% borrower equity.
The CDC portion is available with 10-, 20- and 25-year maturity terms and carries a fixed rate established through the SBA debenture process.
The standard borrower contribution is at least 10%. New businesses, special-purpose properties and higher-risk projects may require a larger contribution.
No. SBA 504 is primarily for long-term fixed assets. Working capital may be financed separately through conventional credit or an eligible SBA 7(a) loan.
Use SBA’s official national CDC directory and filter the list by the state or territory where the project will be located.
Not every 504 loan requires a separate independent feasibility study. A CDC or first-mortgage lender may require one for startups, new construction, special-purpose properties, major expansions or transactions primarily supported by projections.
Usually, one integrated study can support both lenders when both approve the scope, consultant qualifications, assumptions and reliance language before the report is prepared.
President, Wert-Berater, Inc. — independent feasibility study consultants since 1998. More than 4,000 feasibility studies completed across all 50 states and internationally, evaluating $40.2 billion in project value for SBA, USDA, EB-5, conventional, and institutional financing decisions. Fiduciary duty runs to the lender and agency in every engagement.
+1 310-857-2443 ext. 800 · email · 1968 South Coast Hwy, Ste 2382, Laguna Beach, CA 92651 · 111 Town Square Pl Ste 1238 PMB 657834, Jersey City, NJ 07310 · 539 W. Commerce St #8486, Dallas, TX 75208 · 66 W Flagler Street, Suite 900, PMB 12704, Miami, FL 33130
Schedule a ConversationDetermine whether your commercial real-estate, construction or equipment project qualifies for SBA 504 financing and whether an independent market and financial feasibility study will be required by the CDC or first-mortgage lender. Independent feasibility studies since 1998 — 4,000+ engagements, $40.2 billion in evaluated project value.