A 504 loan is two loans, so it carries two sets of fees. The CDC/SBA debenture, roughly 40% of a typical project, has a fee schedule fixed by federal regulation and an annual SBA notice. The bank’s first-lien loan, roughly 50%, carries the bank’s own charges. Most explanations blur the two together or quote a single “about 3%” figure. This guide separates them, cites the rule behind each line, and shows which ones you pay in cash and which ones ride inside the loan.
Fees on the debenture: one-time
Every fee a CDC may charge a borrower is listed in 13 CFR 120.971. Nothing outside that list is allowed.
| Fee | Amount | Rule | Paid how |
|---|---|---|---|
| SBA guarantee fee | 0.5% of the debenture (0.50% in FY2026) | 13 CFR 120.971(d)(1) | Financed |
| CDC processing fee | Up to 1.5% of net debenture proceeds | 13 CFR 120.971(a)(1) | Financed; may be reimbursed from proceeds |
| Funding fee | Up to 0.25% of the debenture | 13 CFR 120.971(e) | Financed |
| Underwriter and agent fees | SBA-approved, published in the Federal Register | 13 CFR 120.971(c) | Financed |
| CDC closing fee | ”Reasonable,” to cover legal and closing costs | 13 CFR 120.971(a)(2) | Partly financeable |
Two details in the processing fee are worth knowing. Two-thirds of it is considered earned when the SBA issues a loan number, so if you withdraw after that point the CDC may keep that share. And the fee is calculated on net proceeds, then added to the gross debenture: the bond investors buy is sized to deliver the net amount your project needs after the one-time fees come out. That is what “financed into the loan” means on a 504 deal, and it is why the debenture on a $400,000 net requirement is written for somewhat more than $400,000.
Fees on the debenture: ongoing
Three recurring charges are collected inside the monthly payment and are already reflected in the effective debenture rate published each month on the SBA 504 loan rates page:
- CDC servicing fee: at least 0.625% and at most 2% per year on the unpaid balance, reset at five-year intervals. Anything above 1% (1.5% in a rural area) needs the SBA’s prior written approval based on substantial need. Paid only from loan payments received.
- SBA annual service fee: capped by regulation at 0.9375%, set each fiscal year by notice. For FY2026 it is 0.209% of the outstanding balance.
- Central servicing agent fee: the CSA that collects payments and passes them to investors charges an initiation fee and a monthly fee under its master servicing agreement.
Because these are bundled into the quoted effective rate, comparing a 504 debenture rate to a bank’s note rate slightly overstates the 504 cost; the bank’s servicing cost is not in its rate.
The bank’s side
The third-party lender’s first-lien loan is a conventional commercial loan and carries whatever origination fee, appraisal, environmental review, title, survey, and legal costs the bank charges on its similar loans. One 504-specific item sits here: under 13 CFR 120.972(a), the bank pays the SBA a one-time participation fee of 0.5% of its loan whenever it holds the senior lien. That fee is the bank’s cost, not a fee the CDC can charge you, though a bank may price it into its rate or origination charge. Separately, the SBA collects an annual fee of 0.125% from the CDC, paid out of the CDC’s servicing income and expressly not chargeable to the borrower.
Fees that only apply if something happens
- Late fee: a payment received after the 15th of the month may draw 5% of the payment or $100, whichever is greater (13 CFR 120.971(a)(4)).
- Assumption fee: if a buyer assumes your 504 loan with SBA approval, the CDC may charge up to 1% of the outstanding balance (13 CFR 120.971(a)(5)).
- Prepayment premium: the debenture is a fixed-rate bond, so paying it off early during roughly the first half of its term triggers a declining premium; the bank loan has its own prepayment terms. The prepayment penalty guide covers both programs.
Who pays 0% in FY2026
For loans approved October 1, 2025 through September 30, 2026, small manufacturers with a primary NAICS code in sectors 31, 32, or 33 pay no SBA upfront guarantee fee and no SBA annual service fee on 504 loans. The CDC processing fee and the other regulatory fees still apply. The SBA sets these rates by information notice each fiscal year, so the FY2026 schedule is a baseline, not a permanent rule; the FY2027 notice will govern loans approved from October 1, 2026.
An illustration
Suppose a $1,000,000 owner-occupied building, financed 50% by a bank, 40% by a 504 debenture, and 10% by you. On a $400,000 net debenture the one-time regulatory fees are, at their caps: $2,000 SBA guarantee fee (0.5%), $6,000 CDC processing fee (1.5%), and $1,000 funding fee (0.25%), plus the underwriter and agent fees and the CDC’s closing costs. Roughly $9,000 of fixed-percentage fees is added to the debenture rather than paid in cash, and the debenture is grossed up accordingly. The bank’s closing costs on its $500,000 first lien are separate and mostly out of pocket. The figures are arithmetic on the regulatory caps, not a quote; a CDC’s actual processing fee may be below 1.5% and its closing fee depends on its counsel.
What is not a 504 fee
Two costs that borrowers sometimes attribute to the 504 program are not part of it. The 7(a) guaranty fee of 2% to 3.75% applies only to 7(a) loans; the 504 equivalent is the 0.5% guarantee fee above, charged on a smaller base. And a packaging fee is a charge by whoever prepares your application; if anyone other than the CDC is paid to package a 504 application, SBA Form 159 must disclose it and the fee must bear a reasonable relationship to the work.
How to use this
Ask the CDC for a fee sheet that maps to the 13 CFR 120.971 list, and ask the bank for its closing-cost estimate separately, so you can see the two halves side by side. Model the payment on the SBA 504 calculator, which builds the debenture at the current effective rate with the ongoing fees included, and read the 504 loan explained and 504 loan requirements if you are still deciding whether the program fits. Which CDCs actually fund projects in your state, ranked by volume from the SBA’s public record, is on the certified development companies page.
Fee rules are set by federal regulation and by the SBA’s annual notice; the FY2026 rates above apply to loans approved through September 30, 2026. Confirm current figures with a CDC before you sign.