The SBA 504 loan program is one of the most powerful financing tools available for purchasing commercial real estate in Texas. The program provides below-market, fixed-rate financing with as little as 10% down payment and terms up to 25 years, making commercial property ownership accessible to businesses that might otherwise be limited to leasing. If your Texas business is considering purchasing a building, constructing a new facility, or acquiring land for business use, the 504 program may offer significantly better terms than conventional commercial mortgages.
How the SBA 504 Works for Real Estate
Loan Structure
The 504 program uses a unique three-party structure. A conventional lender provides 50% of the project cost through a first mortgage. A Certified Development Company (CDC) provides up to 40% through a second mortgage backed by an SBA-guaranteed debenture. The borrower provides the remaining 10% as a down payment. For startups or single-use properties, the down payment may increase to 15% or 20%.
Interest Rates
The CDC portion carries a fixed rate pegged to U.S. Treasury rates, typically below conventional commercial mortgage rates. The rate is fixed for the full 20- or 25-year term, providing long-term payment certainty. The conventional lender portion may be fixed or variable depending on the lender.
Loan Amounts
The CDC portion can reach up to $5.5 million for standard projects and up to $5.5 million for manufacturing, energy, or rural development projects. Total project costs including the conventional lender portion can exceed $10 million.
Eligible Real Estate Uses
- Purchase of existing buildings: Office buildings, retail spaces, warehouses, manufacturing facilities, and other commercial properties.
- New construction: Ground-up construction of owner-occupied commercial buildings.
- Land acquisition: Purchase of land for business facility construction.
- Building improvements: Major renovations, expansions, and modernization of existing facilities.
- Refinancing: Under certain conditions, 504 loans can refinance existing commercial real estate debt with a substantial improvement in terms.
Eligibility Requirements
Business Requirements
The business must be a for-profit company operating in the United States. Net worth must not exceed $15 million and average net income must not exceed $5 million after taxes for the prior two years. The property must be at least 51% owner-occupied (60% for new construction).
Job Creation
The 504 program has a job creation or retention requirement. Generally, one job must be created or retained for every $75,000 of SBA funding ($120,000 for manufacturing). Full SBA 504 guide.
Finding a CDC Lender in Texas
Texas has several active Certified Development Companies including Ameritas, Capital Certified, and others. Your SBDC can provide referrals to active CDCs in your area. Find SBDC services.
Find Programs That May Fit Your Business
SBA 504 loans may be combined with other programs for maximum value. Our free screening report identifies the full range of programs matching your business. Start your free screening →