The 504 Loan Program involves a partnership between the SBA, a Certified Development Company (CDC), and a third-party lender such as a bank or credit union. Here’s how the funding is typically structured:
The third-party lender covers 50% of the project cost. The CDC provides 40% of the project cost, backed by a 100% SBA-guaranteed debenture. The small business borrower contributes 10% of the project cost.
This unique structure helps reduce the risk for lenders while providing businesses with the necessary capital at favorable terms.