Financial

SBA 504 Loan for Franchises

Also known as: CDC/504 Loan, SBA 504

The SBA 504 loan is a Small Business Administration financing program designed for major fixed-asset purchases, including the real estate and building construction often required for franchise locations. Unlike the SBA 7(a) loan which covers general business expenses, the 504 loan provides long-term, fixed-rate financing for real estate and equipment with as little as 10% down. The structure involves a Certified Development Company (CDC) providing 40% of project cost, a bank covering 50%, and the borrower contributing 10%.

Real-World Example

A franchisee building a new $2M restaurant uses an SBA 504 loan: they put down $200,000 (10%), a bank provides $1,000,000 (50%), and the CDC provides $800,000 (40%) at a fixed rate for 20 years, saving an estimated $3,000-5,000 per month compared to conventional commercial mortgage.

Related Terms

SBA Franchise Loan
Financial
Total Initial Investment
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Franchise Occupancy Costs
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Related Resources

SBA Default Rates·Health Score Methodology·Low-Cost Franchises·Franchise Owner Salary Guide

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Last updated: April 2026