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McClure Capital Lending 

Graphic Chart

504 Loans

504 Loans

504 Loans

A CDC (Certified Development Company), is a nonprofit corporation set up to contribute to the economic development of its community.  CDC’s are located nationwide and operate primarily in their state of incorporation (Area of Operation).  CDCs work with SBA and private-sector lenders to provide financing to small businesses through the CDC/504 Loan Program, which provides growing businesses with long-term, fixed-rate financing for major fixed assets, such as land and buildings.

Adam Caar

504 Project 

  • A loan secured from a private-sector lender with a senior lien covering up to 50 percent of the project cost;

  • A loan secured from a CDC (backed by a 100 percent SBA-guaranteed debenture) with a junior lien covering up to 40 percent of the total cost;

  • A contribution from the borrower of at least 10 percent equity.

Adam Caar

7(a) Loans:

The 7(a) Loan Program is SBA’s primary program for helping start-up and existing small businesses, with financing guaranteed for a variety of general business purposes. SBA does not make loans itself, but rather guarantees loans made by participating lending institutions. In this way, taxpayer funds are only used in the event of borrower default. This reduces the risk to the lender but not to the borrower, who remains obligated for the full debt, even in the event of default.

The Difference Between SBA 504 and 7(a) Loans


 SBA 504 Loan

SBA 7(a) Loan

What is Primarily Financed?

Real estate and equipment over a long loan term.

Working capital, inventory, equipment Stock, or another business asset And/or debt to be refinanced.

Why is it Typically used?

Up to 90% loan-to-cost financing; 20-year fixed rate on second mortgage.

Ability to enhance credit, offer Longer terms than allowable Conventionally, or mitigate a Collateral shortfall.

Loan  Structure

First mortgage made by and serviced  by a third-party lender or Mercantile in certain situations; second mortgage originated by Mercantile, subsequently sold in a debenture, and serviced by SBA

Single loan extended and serviced by a  lender, which SBA guarantees.

Loan Size

$500,000 to $20 Million

$250,000 to $5 million

Interest Rate

1st Mortgage: typical conventional pricing

2nd Mortgage: below-market fixed interest rate

 Typically floating at Prime+1% to Prime+ 2.5%


1st Mortgage: 10-year minimum With 20-25 years amortization

2nd Mortgage: 20 years, fully amortizing

Up to 25, fully amortizing   for real estate

Up to 10 years, fully amortizing For all other uses.

Down Payment

Minimum 10% of total project cost (real estate, construction/renovation, Equipment, closing costs, soft costs)


Typically 15% down


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