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SBA 504 vs. Conventional Commercial Mortgage for Florida Businesses
Buying the Florida building your business operates from? An SBA 504 typically needs 10% down and fixes the rate on 40% of the project for up to 25 years. A conventional mortgage usually needs 20% to 30% down and often resets or balloons in 5 to 10 years.
How the Two Loans Compare for Florida Buyers
| Feature | SBA 504 | Conventional Mortgage |
|---|---|---|
| Down payment | Typically 10%. 15% for businesses under 2 years old or special-purpose properties, 20% if both apply. | Typically 20% to 30%, set by the lender |
| Cash down on a $2,000,000 Florida building | $200,000 at 10% down | $400,000 to $600,000 |
| How it's funded | Bank or credit union funds about 50% (1st lien), FBDC funds about 40% (2nd lien), you contribute about 10% | One lender funds the full loan amount |
| Interest rate | SBA portion fixed for the full term, tied to the 10-year Treasury. Bank portion at market rates. | Often fixed for the first 5 to 10 years, then resets or comes due. Variable options are common. |
| Term and balloon | SBA portion fully amortizes over 10, 20, or 25 years with no balloon. Bank portion must run at least 10 years on a real estate 504. | Commonly a 5- to 10-year term on a longer amortization, ending in a balloon payment or refinance |
| Eligible property | Owner-occupied only: your business must occupy at least 51% of an existing building or 60% of new construction | Owner-occupied or investment property |
| Business size limits | Tangible net worth under $20 million and average net income under $6.5 million after taxes | No SBA size limits |
| Fees | SBA fees of about 2.17% of the SBA portion, financed into the loan | Origination and closing fees set by the lender |
| Prepayment | Declining penalty on the SBA portion during the first half of the term (first 10 years on a 20- or 25-year loan). None after that. | Varies by lender: none, a step-down schedule, or yield maintenance |
| Approval | Bank approves its portion. FBDC packages the SBA portion for SBA approval. | Bank approval only |
| Program requirements | For-profit business, plus a job creation, job retention, or public policy goal | Set by the lender |
Conventional terms vary by lender. Program limits and requirements are set by the SBA and can change. 504 rates are updated monthly.
Sources: SBA 504 loans (SBA.gov), 13 CFR 120.921, and NADCO 504 financial specs.
How Much Cash Stays in Your Florida Business?
Enter your project cost to compare the cash you'd bring to closing. This compares down payment only. Ask a loan officer for full payment and fee estimates.
Estimates only. Your actual down payment depends on the project, the property, and lender approval. SBA fees on a 504 are financed into the loan rather than paid at closing.
Get Your Real NumbersYour Bank Is Still in a 504 Deal
A 504 doesn't replace your Florida bank or credit union. The lender still makes a conventional first mortgage, just on half the project instead of 70% to 80%. FBDC's SBA-backed second mortgage fills the gap that a larger down payment would otherwise cover.
SBA 504
Conventional Mortgage
Three Ways the Loans Play Out Over Time
At Closing
A conventional loan ties up 20% to 30% of the purchase price in the building. On a $2,000,000 property, that's $400,000 to $600,000.
In Year 5 to 10
Many conventional commercial mortgages reach a rate reset or balloon in this window, so you refinance at whatever rates are at the time.
If You Sell Early
Paying off early is where conventional can win. Conventional prepayment terms vary, and some loans carry little or no penalty.
When Each Loan Makes More Sense
The deciding factors are who occupies the building, how much cash you want to keep, and how long you plan to own it.
An SBA 504 usually wins when
- Your business occupies the building and plans to stay long term
- You'd rather keep cash for equipment, staffing, or reserves
- You want rate certainty past year 10 on a large share of the loan
- You're building new or renovating and want one long-term structure
- Your bank wants less exposure on the deal
A conventional mortgage usually wins when
- The property is an investment or rental (504 doesn't finance passive real estate)
- Your business exceeds SBA net worth or income limits
- You expect to sell or refinance within the first 10 years
- You already have 25% or more to put down and want one lender
- The project doesn't meet a job creation, retention, or public policy goal
Send It Over and We'll Compare It to a 504
Share your Florida property's purchase price and your bank's terms. We'll show what the same project looks like as a 504, including down payment, fixed-rate portion, and structure.
- Side-by-side cash needed at closing
- Current 504 rate for your term
- Eligibility check for your business
- Can work with your current bank
Get Started Today
Reach our team directly or send us your project details.
SBA 504 vs. Conventional Mortgage FAQs
Is an SBA 504 loan cheaper than a conventional commercial mortgage?
A 504 usually takes less cash upfront: typically 10% down compared with 20% to 30% on a conventional loan. Total cost over time depends on the bank's rate on its 50% portion, the fixed 504 rate on the SBA portion, fees, and how long you keep the loan. The most reliable way to compare is to put both quotes side by side for the same project.
Can I use my current bank with an SBA 504 loan?
Usually, yes. A bank or credit union provides the 50% first mortgage in a 504, and FBDC provides the 40% SBA-backed second mortgage. If you already have a relationship with a lender, that lender can often provide the first mortgage.
Does an SBA 504 loan have a balloon payment?
The SBA portion does not. It fully amortizes over 10, 20, or 25 years. The bank's first mortgage is negotiated with the bank and can have a balloon, but on a real estate 504 it must have a term of at least 10 years.
Can I use an SBA 504 loan to buy investment property?
No. The 504 program is for owner-occupied property. Your business must occupy at least 51% of an existing building or 60% of a newly constructed one. Investment and rental property is typically financed with a conventional loan.
What is the prepayment penalty on an SBA 504 loan?
The penalty applies only to the SBA portion and declines over the first half of the term: years 1 through 10 on a 20- or 25-year loan, and years 1 through 5 on a 10-year loan. There is no penalty after that. The bank's portion has its own terms.
Why do conventional commercial mortgages require a larger down payment?
On a conventional loan, one lender carries the whole loan, so it typically asks for 20% to 30% down to limit its risk. In a 504, the bank lends on 50% of the project in first lien position, and the SBA-backed second mortgage covers another 40%, which is how the borrower's share can drop to about 10%.
Is a 504 loan slower to close than a conventional mortgage?
A 504 adds an SBA approval step for the SBA portion, which FBDC packages and submits. Most FBDC 504 loans close within 60 to 90 days of starting the process. See our process for each step. A conventional loan has one approval instead of two.
Can I refinance a conventional commercial mortgage into a 504?
In many cases, yes. The SBA 504 Refinance Program can refinance qualified commercial real estate debt into long-term, fixed-rate financing. Eligibility depends on the existing loan and the property. See the SBA 504 Refinance Program.
Who offers SBA 504 loans in Florida?
SBA 504 loans are made through Certified Development Companies (CDCs) working alongside a bank or credit union. FBDC is a private, nonprofit CDC that has administered the 504 program in Florida since 1989, with offices in Tampa, Miami, Orlando, and Jacksonville. Contact a loan officer.
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FBDC is a private, non-profit Certified Development Company established in 1989 to administer the Small Business Administration (SBA) 504 Loan Program. In addition to the 504 Loan Program, FBDC is active in the economic development in the community in which it serves.