Make Payment


A 504 loan can be used to finance fixed assets, including the purchase or construction of owner occupied commercial real estate, and machinery and equipment. In addition, it can be used to refinance debt already on a commercial building.
Before starting the SBA 504 loan application process, it’s important to get prequalified by Arizona Capital Source (ACS), your local Certified Development Company (CDC). Once you’ve been prequalified, ACS will manage the complete 504 process to ensure you obtain final SBA approval in a timely manner. In addition to needing SBA’s approval, you will need approval from a lender, typically a bank, who will generally provide 50% of the financing.
To determine how 504 interest rates are calculated, you need to understand the program structure, which includes two loans – a first mortgage and a second mortgage. The first mortgage is provided by a lender, typically a bank, and generally covers 50% of the total project costs. The second mortgage, the 504 loan, generally covers 40% of the total project. The first mortgage rate will be dependent on the bank of your choosing and will have a term of 10 to 25 years, while the SBA second loan is always fixed with a fully amortizing term of 10, 20, or 25 years (no balloons). The first mortgage rates can vary depending on the property type and business cash flow and credit. Second mortgage rates are set once a month and are the same for all transactions across the entire U.S. Please see the homepage for the current rate.
The SBA 504 program can help your business get funding for buying a commercial property or expanding your existing business. In order to qualify, you need to make a down payment, i.e. injection, of 10 – 20% of the total project cost, depending on the type of business and property type. However, if you don’t have enough cash for the injection, you can borrow the injection as long as your business has enough cash flow to support the entire amount of financing.
The 504 prepayment penalty is determined by the length of the SBA loan. For 20 or 25 year repayment periods, the prepayment penalty decreases every year over a 10 year period. For SBA loans with a term of 10 years, the prepayment penalty is reduced to 5 years. The penalty is determined by the amount of your loan at time of prepayment and the debenture rate, which is the interest rate you’re paying on your 504 loan.

The 504 loan program consists of three parts: a lender (usually a bank) provides 50% of the total project, the CDC/SBA provides 40%, and the borrower provides 10% (maybe up to 20% for new businesses and unique-purpose properties, such as a hotel).

SBA 504 loans are “fully collateralized,” meaning the assets being financed are used as security. In addition, the business owners are required to provide personal guarantees. However, additional collateral, such as personal residences, are generally not required.  The 504 loan relies on the financed property as collateral, which makes it easier for businesses with limited assets to obtain a 504 loan.

Owners of 20% or more of either the Operating Company (the business that generates revenues and will occupy the building) or the Real Estate Holding entity (if applicable) must provide an unlimited full personal guarantee. Other guarantees may be required on a case-by-case basis. 

The first step is contacting Arizona Capital Source to begin the application process.  Loans are typically pre-approved within 2-3 days, with a final SBA approval obtained in 30-60 days, depending on the project’s complexity (construction projects, for example, tend to take longer).  Premier CDCs, such as Arizona Capital Source, have the authority to make credit decisions on behalf of the SBA, which helps speed up the approval process.  The SBA Express program is also an option for smaller projects and shaves off 1-2 weeks from the process. 

Have a Question You Don't See an Answer To? Contact us and let's talk

We are happy to help!

Please provide some basic information and one of our Relationship Managers will be in touch to discuss your loan request.