# SBA 504 for Equipment Financing

Canonical URL: https://fundmyequipment.com/learn/sba-504-equipment/
Last modified: 2026-05-29T19:39:17+00:00
Type: efin_guide

## Summary

SBA 504 for Equipment Financing. Comprehensive guide covering the topic in depth, with worked examples, current data, and cross-references.

## Content

SBA 504 is a long-term, fixed-rate loan program specifically designed for major fixed-asset purchases including equipment. The structure involves three parties: a bank, a Certified Development Company (CDC), and the SBA.

How 504 works

504 loans split financing across three parties:

50% bank loan at conventional terms
40% SBA loan through a CDC at fixed long-term rate
10% borrower down payment (15-20% for startups or special-use property)


The bank takes first position on collateral. SBA takes second. Borrower brings the equity.

What 504 finances


Major equipment with 10+ year useful life
Commercial real estate
Building construction and improvements
Some intangible costs related to fixed assets


504 is designed for capital-intensive expansions and is well-suited to equipment over $250,000 with long useful life.

Typical terms


VariableTypical range

Bank loan rateConventional market
CDC/SBA loan rateFixed at issuance, often 5-8%
Term10-25 years
Total down payment10-20%
Maximum loan$5M (SBA portion); larger total possible with bank portion
Personal guaranteeRequired



Eligibility


Operating for-profit business
Meets SBA size standards
Net worth under $20M, average net income under $6.5M (last 2 years)
Demonstrates ability to repay
Creates or retains jobs (community impact criterion)
Owner occupies / uses the asset


504 vs 7(a) for equipment


Feature5047(a)

Term length10-25 yearsUp to 10 years
SBA rateFixedVariable
Down payment10-20%10-20%
Best forLong-life major assetsGeneral equipment + working capital
Real estate comboYes, designed for itPossible but less common
ComplexityHigher (three parties)Lower



Process


Find a bank willing to do the 50% portion
Find a CDC to handle the 40% SBA portion
Submit application to both
Bank underwrites and approves their portion
CDC underwrites and submits to SBA for approval
SBA approves and funds the bank for the 40%
Project closes; equipment placed in service
Total timeline: 60-120 days typically


When 504 makes sense


Equipment + real estate package
Long-lived equipment (15+ year useful life)
You want fixed-rate long-term financing
You want to preserve cash beyond conventional down payment
Community economic development considerations


When 504 does not fit


Equipment with shorter useful life (under 10 years)
Working capital needs
Need fast closing (under 60 days)
Smaller loan amounts (under $200K typically)


Common 504 equipment scenarios


Manufacturing facility expansion with new production line
Hotel or restaurant build-out with kitchen and FF&E
Medical practice with imaging suite and build-out
Distribution center with material handling equipment
Brewery with brewing system and real estate
Car wash tunnel system with real estate


Action steps


Identify equipment with 10+ year useful life
Determine if real estate is part of the project
Find a bank with 504 experience
Identify your local CDC (apps.sba.gov has directory)
Prepare detailed business plan and projections
Plan 60-120 day closing timeline