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SBA 504 calculator
An SBA 504 loan is a fixed-rate, long-term loan for owner-occupied commercial real estate and major equipment, structured as two loans: a first lien from a bank for about half of the project and a second lien from a Certified Development Company (CDC) debenture, backed by the SBA, for up to about 40%. The borrower contributes the rest as equity.
Results are indicative estimates for discussion. They are not a loan offer, a rate quote or a commitment to lend. Nothing you type here is sent anywhere; the math runs in your browser.
How it works
The calculator starts from total project cost. The bank first lien is 50% of cost. Equity is 10% as a base, plus 5% for special-purpose property such as hotels and care facilities, plus 5% for a start-up or new construction. The debenture is what remains, up to a cap of $5.0M, or $5.5M for energy-efficient and manufacturing projects.
Both loans are priced on a 25-year amortization. The debenture rate defaults to the 10-year Treasury plus a mid-range spread and the bank rate to the 5-year Treasury plus a spread; overwrite either. Ongoing SBA, CDC servicing and related fees (1.09% a year on the debenture) are added to debt service before coverage is measured against the 1.25x minimum.
Reading the result
If the debenture cap binds, the table shows how much more equity the structure needs. A larger bank first lien or an SBA 7(a) stack are the usual alternatives; the 7(a) plus 504 combination is covered on the hotel stack page.
SBA program rules change by SOP revision, so confirm the revision in effect when you apply. The operating company must occupy at least 51% of the property.
Frequently asked questions
How much equity does an SBA 504 hotel loan need?
Corin's assumptions use 10% as a base, 5% more for special-purpose property such as hotels, and 5% more for a start-up or new construction, so 15% for an existing hotel purchase and 20% for ground-up. Confirm against the SOP in effect at application.
What is the maximum SBA 504 debenture?
The standard cap in Corin's assumptions is $5.0M per project, and $5.5M for energy-efficient and manufacturing projects. Rules change by SOP revision, so confirm the current caps.
Is the 504 rate fixed?
The CDC debenture is fixed for its term. The bank first lien is priced separately by the bank and may be fixed or adjustable.
Does the borrower need a personal guaranty?
Yes. The SBA requires personal guaranties from owners of 20% or more, so 504 is not a non-recourse program.
Is this a quote?
No. It is an indicative estimate. A bank and a CDC underwrite the actual loan, and rates are set when the debenture is sold.
Related financing
- SBA 504 hotel loansBank first lien plus a 25-year fixed CDC debenture for owner-operated hotels.
- SBA 7(a) + 504 hotel stackA combined 7(a) and 504 structure for larger hotel projects.
- Hotel CMBSFixed-rate, non-recourse conduit debt for stabilized hotels.
- PIP bridgeFloating, interest-only debt to complete a franchise renovation before a permanent takeout.
Terms used here
- SBA 504 loanAn SBA 504 loan is a fixed-rate loan for owner-occupied commercial real estate, structured as a bank first lien of about 50% of the project, a CDC debenture for most of the rest, and borrower equity. The operating business must occupy at least 51% of the property, and owners of 20% or more give personal guaranties.
- Certified Development CompanyA Certified Development Company is a nonprofit lender certified by the U.S. Small Business Administration to deliver the SBA 504 program in its region. The CDC makes the second-lien loan, funded by an SBA-backed debenture, alongside a bank's first-lien loan.
- SBA debentureA debenture is the bond sold to investors to fund the SBA 504 second-lien loan made by a Certified Development Company. Its rate is fixed for the life of the loan and set when the debenture is sold.
- Equity injectionAn equity injection is the cash a borrower must put into a project. For SBA 504, Corin's assumptions use 10% as a base, 5% more for special-purpose property such as hotels and care facilities, and 5% more for a start-up or new construction.
- Debt service coverage ratioDebt service coverage ratio is annual net operating income divided by annual loan payments. A ratio of 1.25x means income is 125% of the payment. Corin's sizing assumptions use 1.15x for HUD market-rate multifamily, 1.25x for agency multifamily, 1.25x for SBA, 1.45x for HUD Section 232 and 1.40x for hotel CMBS.
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