Current SBA 504 rates · September 2026 SBA 504 historical rates → Las Vegas (702) 877-9111Reno (775) 770-1240
  1. Home
  2. SBA 504 loans
  3. 504 vs conventional

Comparison

SBA 504 vs a Conventional Commercial Loan

A conventional commercial mortgage typically requires 20 to 25% down with a rate that resets or balloons within five to ten years. An SBA 504 loan requires about 10% down and fixes the SBA portion for the full 10, 20 or 25-year term. On a $1,000,000 project, that difference is roughly $150,000 in cash the business keeps.

Side by side

ConventionalSBA 504
Down payment20–25%, lender's call10% (15% start-up or special-purpose; 20% both)
RateVariable, or fixed 5–10 years then resetsFixed for the full term on the SBA portion
Term5–20 years, often with a balloon10, 20 or 25 years
LoansOneTwo: bank first mortgage (50%) and CDC second (40%)
FeesOrigination, closingroughly 3% of the SBA portion, financed, plus closing
PrepaymentVaries; often a penalty during a fixed periodDeclining premium on the SBA portion, gone from year 11
SpeedCan be faster with cash and a simple dealMost NSDC loans close within 45 days
EligibilityAny property, any useOwner-occupied (51%+), for-profit, under SBA size limits

The same building, both ways

A $1,000,000 owner-occupied building, existing, business operating six years.

Conventional, 25% down: $250,000 in cash. $750,000 financed, at a rate that typically resets or balloons between year five and year ten; the payment in year seven is a number you don't know today.

SBA 504, 10% down: $100,000 in cash. $500,000 bank first mortgage on the bank's terms; $400,000 SBA portion fixed for 25 years. Fees of roughly 3% on the $400,000, financed.

$150,000 stays in the business. And in year seven, you know exactly what 40% of your financing costs, because it was set the month you closed.

Run it on your building

When conventional is the better answer

You have the cash and you'd rather deploy it than pay 504 fees. You need to close in three weeks. You'll sell or move within five years and the prepayment premium would bite. The property won't meet the occupancy test. Or the deal is small enough that two closings feel like more process than it's worth. Those are real cases, and we'll tell you when you're in one.

When 504 is the better answer

You're buying the building you work in, you plan to hold it, and the down payment is what's standing between you and owning it. That's most of the people who call us.

Questions

Is the 504 rate higher than a bank's?
On closing day the effective rates can be close. The difference is what happens after: the SBA portion never moves. This month's rate.
Can I refinance a conventional loan into a 504?
Often, if the property is owner-occupied and the debt meets SBA's refinance rules. The refinance rules.

Conventional terms shown are typical market ranges, not a specific lender's offer. This page is for general informational purposes only.