SBA 504 Loans California
The SBA 504 loan is one of the best small business financing tools in existence for California business owners who want to own the real estate their business occupies. I’ve worked with California business owners on SBA 504 transactions for years — dentists buying their office building, manufacturers acquiring industrial space, restaurant owners purchasing their location — and the program delivers terms that no conventional commercial loan can match: 10% down, below-market fixed rate on the SBA tranche, and 25-year amortization that produces a manageable monthly payment.
I’m Michael DiVita, owner of DiVita Home Finance. Licensed in California since 2007. SBA 504 transactions require a specific lender structure involving both a conventional lender (typically a bank) and a Certified Development Company (CDC). I guide business owners through the entire process.
How the SBA 504 Loan Works
An SBA 504 loan has a three-party structure: you bring 10% down, a conventional lender (bank or credit union) provides 50% as a first mortgage, and the SBA’s Certified Development Company provides 40% as a second mortgage backed by an SBA debenture. The SBA tranche carries a fixed rate tied to current 10-year Treasury rates, typically well below market commercial rates, and amortizes over 25 years. The bank’s 50% is underwritten separately with its own rate and terms.
This structure means 90% financing for eligible commercial real estate purchases — something conventional commercial loans almost never allow at competitive terms. California business owners who qualify can acquire owner-occupied commercial property with significantly less capital than the standard 25–35% down a conventional commercial lender requires.
SBA 504 Eligible Property and Business Types
- Eligible Properties: Office buildings, medical offices, retail spaces, industrial/warehouse, manufacturing facilities, restaurants (owner-occupied), hotels/motels. The business must occupy at least 51% of the space.
- Eligible Businesses: For-profit US businesses with tangible net worth under $20M and average net income under $6.5M (after taxes, over 2 years). Most California small businesses qualify.
- Loan Amount: The SBA tranche is typically $500K–$5.5M (up to $16.5M for manufacturing or energy projects). No cap on total project size.
- Use of Proceeds: Purchase of existing building or land + construction, long-term machinery/equipment, renovation. Cannot be used for working capital, inventory, or debt refinancing (with limited exceptions).
SBA 504 Loan FAQ — California
How long does an SBA 504 loan take to close in California?
SBA 504 transactions are more complex than conventional loans and typically take 45–90 days to close. The process involves parallel underwriting by both the bank lender (for the 50% first mortgage) and the CDC (for the SBA 40% second). Documentation is extensive: 3 years of business tax returns, 3 years of personal returns, business financial statements, property appraisal, environmental Phase I, business plan, and more. I coordinate the documentation process and work with both the bank and CDC to keep the timeline moving. If you’re starting the SBA 504 process, call me 60–90 days before your target close date.
What’s the interest rate on an SBA 504 loan in 2026?
The SBA 504 debenture rate is fixed at funding and is based on the current 10-year Treasury rate plus a spread. The rate on new debentures in 2026 is set monthly — call me for the current month’s rate. The bank’s first mortgage (50% of the project) carries a separate rate that varies by lender, typically fixed or variable at the bank’s commercial lending rates. The blended effective rate combining both tranches is typically competitive with or below conventional commercial mortgage rates, especially given the 25-year amortization on the SBA portion. The real advantage is less the rate than the ability to put just 10% down.
Can I use an SBA 504 loan to buy a building if I only occupy part of it?
Yes — the SBA 504 requires that your business occupies at least 51% of the building at the time of purchase (60% for new construction). The remaining space can be leased to tenants, and that rental income can help offset your mortgage payment. This is actually a common strategy for California business owners who want to purchase a building larger than their current needs, occupy the majority, and lease the remainder while the business grows into the additional space. I’ve helped business owners structure 504 purchases of 4,000–10,000 sq ft buildings where they occupy 2,500+ sq ft and lease the rest.
Talk to Michael Directly
DiVita Home Finance | Marin County, CA | Licensed since 2007. DRE #01818285 | NMLS #323700.
💬 Text: (310) 849-9124
