Owner-occupied

SBA 504 blended rate

What does a two-note structure really cost against one conventional loan?

Splits a project across a conventional first mortgage, a CDC/SBA debenture and the borrower’s injection, computes each payment and the blended rate, and sets the whole thing beside a conventional alternative.

Every default here is an illustrative figure chosen to be plausible. Nothing on this page is a rate sheet, a quote or an offer, and no licence or NMLS number exists to attach to it.

The project

The 504 structure

Conventional comparison

Injection required——
Total monthly—Both notes together
Blended rate—Weighted by balance
Against conventional——

The stack

Illustrative

Two lenders and a borrower on one project. The headline benefit is not usually the rate — it is the height of the bottom band.

SBA 504 structure against a conventional loanTwo stacked columns comparing the 504 structure with a conventional loan.
Conventional first mortgage CDC / SBA debenture Borrower injection

Side by side

LineSBA 504ConventionalDifference

The rules that actually govern this

  • Owner-occupancy. The operating business must occupy at least 51% of the rentable area of an existing building. For new construction the test is 60% at occupancy, rising to 80% over ten years. This is an SBA rule, not a lender preference.
  • 7(a) cap. The 7(a) programme has a statutory maximum loan amount of $5 million. The 504 debenture has its own separate limits, which vary by project type.
  • Injection. The standard 10% rises — typically to 15% for a start-up or a special-purpose property, and 20% where both apply.
  • Guarantees. Every owner of 20% or more personally guarantees. There is no non-recourse version of either programme.

Those four are real rules stated accurately. Every rate, share and amortisation in the controls above is an illustrative default.

Assumptions on this page

  • Both notes are treated as fully amortising over the terms set. In practice the conventional first usually has a shorter term with a balloon, which this comparison does not model.
  • CDC processing fees, the SBA guarantee fee and debenture servicing are not included; they are typically financed into the debenture and would raise the payment slightly.
  • The blended rate is weighted by balance, not by payment, which is the conventional way to express it.
  • Illustrative arithmetic. Nothing here is a quote, and no lender or CDC is named because none is involved.

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