What is SBA 504 Program?
The SBA 504 loan program provides long-term fixed-rate financing for major fixed assets, primarily commercial real estate and heavy equipment. The structure is three-part: a conventional bank provides 50% as a first lien, a Certified Development Company (CDC) provides 40% through an SBA-guaranteed debenture, and the borrower contributes 10% equity. The CDC debenture has a 10-year term for equipment or 20-year term for real estate. Unlike 7(a) loans, 504 debentures have fixed rates set at a monthly debenture sale, making them attractive for borrowers seeking rate certainty.
How LoanBook Uses SBA 504 Program
LoanBook includes a proprietary SBA 504 prepay and default model calibrated from funded SBA 504 FOIA loans. The 504 model uses age-based CPR (no S-curve, because FOIA data lacks individual rate information) with industry, state, vintage, CDC, and third-party lender multipliers. The platform tracks both CDC debentures and third-party bank first liens.
Frequently Asked Questions
How is a 504 loan different from a 7(a) loan?
504 loans are exclusively for fixed assets (real estate, equipment) with a three-party structure (bank + CDC + borrower). 7(a) loans are more flexible; they can fund working capital, inventory, debt refinancing, and have a simpler two-party structure (lender + borrower with SBA guarantee).
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