The Complete Guide to SBA 504 Loans in Michigan: Commercial Real Estate & Equipment Financing with 10% Down | Fixed Rates for 25 Years | 2026
Last Updated: January 2026 | Reading Time: 16 minutes
Stop paying rent. Start building equity. SBA 504 loans provide Michigan businesses with the lowest down payments, longest fixed-rate terms, and most stable monthly payments available for purchasing commercial real estate and major equipment.
If you're a Michigan business owner looking to buy your building, purchase a manufacturing facility, acquire a warehouse, or finance major equipment—and you want fixed rates for 25 years with just 10% down—this comprehensive guide covers everything you need to know about SBA 504 loans in 2026.
Table of Contents
What Are SBA 504 Loans in Michigan?
The Michigan SBA 504 Market in 2026
What Can You Use SBA 504 Loans For?
SBA 504 vs. SBA 7(a) vs. Conventional Loans
SBA 504 Requirements for Michigan Businesses
Rates, Terms & Structure
The SBA 504 Process
Michigan Industries Using SBA 504 Loans
Real Michigan Success Stories
Frequently Asked Questions
What Are SBA 504 Loans in Michigan?
SBA 504 loans provide Michigan businesses with long-term, fixed-rate financing specifically for purchasing commercial real estate and major equipment. Unlike conventional commercial loans or SBA 7(a) loans, the 504 program offers the lowest down payments, longest fixed-rate terms, and most stable monthly payments available for owner-occupied properties.
For Michigan businesses from Metro Detroit to Grand Rapids, Ann Arbor to Lansing, and throughout the state, SBA 504 loans have become the preferred financing for commercial real estate—whether you're a manufacturing company buying a production facility in Sterling Heights, a medical practice purchasing an office building in Grand Rapids, or a distribution company acquiring a warehouse in Livonia.
The Unique Three-Part SBA 504 Structure
SBA 504 loans are structured with three funding sources:
1. Bank Loan (50% of project cost)
First lien position on the property
Variable or fixed rate (lender's choice)
20-25 year term
Current Michigan rates: 6-8%
2. SBA-Backed CDC Loan (40% of project cost)
Second lien position on the property
Fixed rate for the life of the loan (this is huge)
10, 20, or 25 year term (25 years most common)
Current Michigan rates: 5.5-6.5%
3. Your Business Equity (10% minimum down payment)
Cash injection from the business
Can also include seller financing or existing equipment equity
Total project sizes: Typically $250,000 to $20 million+, with the SBA CDC portion capped at $5 million for standard projects and $5.5 million for Michigan manufacturing businesses and energy-efficient projects.
Example SBA 504 Structures
$2 Million Office Building Purchase:
Bank loan: $1,000,000 (50%)
SBA 504 CDC loan: $800,000 (40%)
Your down payment: $200,000 (10%)
$10 Million Manufacturing Facility:
Bank loan: $5,000,000 (50%)
SBA 504 CDC loan: $4,000,000 (40%)
Your down payment: $1,000,000 (10%)
Why Michigan Businesses Choose SBA 504 Loans
✓ 10% down payment (vs. 25-35% for conventional commercial mortgages)
✓ Fixed rates for life (10, 20, or 25 years—zero interest rate risk on 40% of the loan)
✓ No balloon payments (fully amortizing—you own the property free and clear at the end)
✓ Lower monthly payments (25-year terms significantly reduce payment vs. 15-year conventional)
✓ Preserves working capital (less cash required upfront means more cash for operations)
✓ Build equity instead of paying rent (stop making landlords wealthy)
✓ Large projects (finance up to $20M+ total project cost)
✓ Equipment included (can finance major equipment alongside real estate)
The Michigan SBA 504 Market in 2026
Michigan businesses are using SBA 504 loans at record levels for commercial real estate purchases and equipment financing, particularly in manufacturing, healthcare, distribution, and professional services sectors.
Current Michigan SBA 504 Market Conditions (2026)
Average project size: $2.8 million
Typical down payment: 10-15%
Fixed rates (SBA portion): Currently 5.5-6.5%
Most common use: Commercial real estate purchases (office buildings, manufacturing facilities, warehouses)
Top industries: Manufacturing (Michigan's #1 category), healthcare, retail, distribution, professional services
Michigan's Top SBA 504 Project Types
Manufacturing facilities (Michigan's largest 504 category by volume)
Industrial buildings and production facilities
Automotive supplier facilities
Food processing plants
Metal fabrication shops
Medical and dental office buildings
Physician practice buildings
Dental offices
Veterinary clinics
Urgent care facilities
Warehouses and distribution centers
Industrial warehouses
Logistics facilities
Cold storage
E-commerce fulfillment centers
Retail buildings and storefronts
Shopping centers
Standalone retail locations
Restaurant buildings
Franchise locations
Office buildings for professional services
Law firms
Accounting practices
Engineering firms
Technology companies
Geographic Concentration in Michigan
Metro Detroit leads Michigan in SBA 504 loan volume, accounting for approximately 45% of state activity, followed by:
Grand Rapids and West Michigan (25%)
Ann Arbor and Southeast Michigan (15%)
Lansing and Mid-Michigan (10%)
Other Michigan markets (5%)
What Can You Use SBA 504 Loans For?
CRITICAL LIMITATION: SBA 504 loans can ONLY be used for commercial real estate and equipment—not business acquisitions or working capital.
If you need to buy a business or need working capital, you want an SBA 7(a) loan instead.
Commercial Real Estate (Primary Use)
SBA 504 loans excel at financing owner-occupied commercial real estate:
✓ Office buildings – Purchase buildings for your business operations
✓ Manufacturing facilities – Industrial buildings, production facilities, automotive supplier facilities
✓ Warehouses – Distribution centers, storage facilities, logistics operations
✓ Retail buildings – Storefronts, shopping centers, restaurant buildings
✓ Medical offices – Dental practices, physician offices, veterinary clinics, urgent care
✓ Mixed-use properties – Must occupy 51%+ for your business, can rent up to 49%
✓ New construction – Build your facility from the ground up
✓ Major renovations – Purchase and renovate existing buildings
Owner-occupancy requirement: You must occupy at least 51% of the property for your own business operations. You can rent up to 49% to other tenants.
Michigan examples:
Detroit manufacturing company purchases 40,000 sq ft production facility
Grand Rapids medical practice buys 8,000 sq ft office building
Ann Arbor retailer acquires downtown storefront with apartments above (occupies 60%)
Lansing distributor purchases 60,000 sq ft warehouse
Troy professional services firm buys office building, rents extra space
Major Equipment & Machinery
SBA 504 loans can finance equipment with a useful life of 10+ years:
✓ Manufacturing equipment – CNC machines, production lines, industrial machinery, robotics
✓ Heavy construction equipment – Excavators, cranes, bulldozers, specialized trucks
✓ Medical equipment – MRI machines, CT scanners, surgical equipment, dental chairs
✓ Food processing equipment – Commercial kitchens, packaging machinery, bottling lines
✓ Material handling systems – Forklifts, conveyors, warehouse automation systems
Equipment must have a useful life of 10+ years to qualify.
What You CANNOT Use SBA 504 Loans For
❌ Business acquisitions (use SBA 7(a) instead)
❌ Working capital (use SBA 7(a) instead)
❌ Inventory
❌ Debt refinancing (unless combined with substantial expansion—15-20%+ new investment)
❌ Investment properties (passive real estate you don't occupy)
❌ Speculative real estate
Remember: If you're buying a business OR need working capital alongside real estate, SBA 7(a) is the right program. SBA 504 is exclusively for real estate and equipment where you DON'T need working capital.
SBA 504 vs. SBA 7(a) vs. Conventional Loans: Which Is Right for Your Michigan Business?
Choose SBA 504 When:
✓ You're purchasing commercial real estate or equipment ONLY (no working capital needed)
✓ You want a fixed rate for 10-25 years (eliminates interest rate risk)
✓ You DON'T need working capital
✓ Your project is $1 million+ (504 structure is more cost-effective for larger projects)
✓ You want the lowest possible monthly payment
✓ You'll occupy 51%+ of the property for your business
Choose SBA 7(a) When:
✓ You're acquiring a business or franchise (504 doesn't allow this)
✓ You need working capital along with real estate or equipment
✓ You want faster closing (7(a) closes 2-4 weeks quicker than 504)
✓ Your project is under $1 million (simpler structure for smaller deals)
✓ You want maximum flexibility in use of funds
Choose Conventional Financing When:
✓ You have 30%+ cash for down payment
✓ You have perfect credit (720+) and exceptional financials
✓ You want the fastest possible closing
✓ You're willing to accept balloon payment risk
✓ You have strong banking relationships
Real Michigan Example: $3 Million Building Purchase
SBA 504 Structure:
Down payment: $300,000 (10%)
Bank loan: $1,500,000 (50% at 7%)
SBA CDC loan: $1,200,000 (40% at 6% fixed)
Monthly payment: ~$19,000
Fixed for 25 years
No balloon payment
Total down: $300K
Conventional Structure:
Down payment: $900,000 (30%)
Bank loan: $2,100,000 (70% at 8%)
Monthly payment: ~$21,000
Rate adjusts after 5-7 years
Balloon payment after 7-10 years
Total down: $900K
SBA 504 Advantage:
Saves $600,000 in down payment
Saves $2,000/month ($24,000 annually)
Fixed rate provides stability
No balloon payment risk
SBA 504 Requirements for Michigan Businesses
Basic Eligibility Criteria
✓ 2+ years in business (tax returns required to demonstrate track record)
✓ Profitable with positive cash flow (must demonstrate ability to service debt)
✓ Personal credit 650+ (680+ strongly preferred)
✓ Occupy 51%+ of property (for your own business operations)
✓ U.S.-based for-profit business (nonprofits don't qualify)
✓ Net worth under $15 million (SBA small business size standards)
✓ Net income under $5 million (after taxes, averaged over 2 years)
Financial Requirements
Strong cash flow is critical for SBA 504 approval:
Lenders typically require debt service coverage ratio (DSCR) of 1.20x or higher
What this means: Your business cash flow should be at least 120% of all debt payments (existing debt + new SBA 504 loan)
Example:
Monthly cash flow available for debt: $35,000
Existing debt payments: $8,000/month
New SBA 504 payment would be: $19,000/month
Total debt payments: $27,000/month
DSCR: $35,000 ÷ $27,000 = 1.30x ✓ (Approved)
Down Payment Requirements
Standard projects: 10% down payment
Special purpose properties (gas stations, hotels, car washes): 15-20% down
New businesses (less than 2 years): 15% down
Startups: 20-25% down (very difficult to qualify)
Property Requirements: The 51% Owner-Occupancy Rule
Critical requirement: You must occupy at least 51% of the property for your own business operations.
What works:
You occupy 100% for your business ✓
You occupy 60% for your business, rent 40% to tenants ✓
You occupy 51% for your business, rent 49% to tenants ✓
What doesn't work:
You occupy 40% for your business, rent 60% to tenants ✗
Investment property with no owner occupancy ✗
You occupy it today but plan to move in 2 years ✗
For mixed-use properties: If you're buying a building with retail on the first floor and apartments above, you must occupy 51%+ of the square footage for your business.
Credit Requirements
Personal credit score:
680+ credit: Strong candidate, standard approval process
650-679 credit: Good candidate, may need stronger compensating factors
620-649 credit: Very difficult, requires exceptional business strength
Below 620: Typically not approved for SBA 504
Business credit: Strong business credit history helps your application (on-time payments to suppliers, vendors, existing creditors)
Credit issues that CAN be overcome:
Past late payments (if resolved and you provide written explanation)
Prior bankruptcies (if discharged 2+ years ago)
Collections or judgments (if paid in full or in active repayment)
High credit utilization (if cash flow clearly supports new debt)
Credit issues that are DIFFICULT to overcome:
Recent bankruptcies (within 1-2 years)
Current judgments or tax liens
IRS tax liens (must be resolved)
Recent foreclosures
Multiple recent late payments
Time in Business
2+ years strongly preferred with tax returns demonstrating consistent profitability
Less than 2 years: Possible but significantly harder—requires:
15-20% down payment
700+ credit score
Significant industry experience (5+ years)
Comprehensive business plan
Strong financial projections
Startups: Extremely difficult for SBA 504. If you're a startup, SBA 7(a) or conventional financing may be better options.
SBA 504 Loan Terms, Rates & Structure for Michigan
The Three-Part Loan Structure Explained
Every SBA 504 loan has three distinct components:
PART 1: Bank Loan (50% of Project Cost)
Structure:
First lien position on the property
Provides 50% of total project financing
Variable or fixed rate (bank's choice, most use variable)
20-25 year amortization (most common: 25 years)
Current Michigan rates (2026): 6-8% depending on bank and borrower strength
Example on $3M project:
Bank provides: $1,500,000
Rate: 7% variable
Term: 25 years
Monthly payment: ~$10,600
PART 2: SBA CDC Loan (Up to 40% of Project Cost)
Structure:
Second lien position on the property
Provides up to 40% of total project financing
Fixed rate for the LIFE of the loan (this is the huge advantage)
10, 20, or 25 year term (25 years most common for real estate)
No prepayment penalty after typical 1-2 year window
Current Michigan rates (2026): 5.5-6.5% fixed for life
Example on $3M project:
CDC provides: $1,200,000
Rate: 6.0% fixed for 25 years
Term: 25 years
Monthly payment: ~$7,700
PART 3: Your Business Equity (10%+ Down Payment)
Structure:
Cash injection from business
Can include seller financing in some cases
Can include equity in existing equipment (for equipment-heavy projects)
Example on $3M project:
Your contribution: $300,000
Source: Cash from business operations or owner equity
Combined Effective Interest Rates
On a typical $3 million SBA 504 project:
Bank portion (50% at 7%): Weighted cost 3.5%
SBA portion (40% at 6%): Weighted cost 2.4%
Combined effective rate: ~5.9%
Compare to alternatives:
Conventional commercial mortgage: 8-12%
SBA 7(a) loan: 9-11%
SBA 504 advantage: 2-5% lower effective rate
Repayment Terms
Commercial real estate: 20 or 25 years (25 years most common)
Equipment: 10 or 20 years (based on useful life of equipment)
All SBA 504 loans are fully amortizing—no balloon payments.
You know your exact monthly payment for the life of the loan. When the term ends, you own the property free and clear.
Example monthly payment on $3 million project, 25 years:
Bank payment (50% portion): ~$10,600/month
SBA CDC payment (40% portion): ~$7,700/month
Total monthly payment: ~$18,300/month
Project Size Ranges
Minimum practical size: $250,000 (below this, costs don't justify 504 structure)
Maximum total project: $20 million+ (SBA portion capped at $5-5.5M)
SBA CDC portion cap: $5 million standard, $5.5 million for manufacturing and energy projects
Typical Michigan project sizes:
Small projects: $500K - $1.5M (small office buildings, equipment packages)
Medium projects: $1.5M - $5M (warehouses, medical offices, retail buildings)
Large projects: $5M - $15M (manufacturing facilities, large distribution centers)
Mega projects: $15M+ (major industrial facilities, campus developments)
Example of large project structure ($18M manufacturing facility):
Bank loan: $9,000,000 (50%)
SBA CDC loan: $5,500,000 (capped at maximum)
Your equity: $3,500,000 (19.4%)
Fees & Closing Costs
SBA CDC processing fee: 1.5% to 2.5% of SBA CDC loan amount
Bank closing costs: $3,000 - $10,000 (varies by bank)
Third-party costs: $10,000 - $25,000 (appraisal, environmental assessment, survey, title insurance, legal)
Total closing costs: Typically 2-4% of total project cost
Example on $3 million project:
CDC processing fee (2% of $1.2M): $24,000
Bank closing costs: $5,000
Third-party reports and services: $15,000
Legal fees: $5,000
Total closing costs: $49,000 (1.6% of project)
Important: Most closing costs can be rolled into the loan financing (you don't pay them out of pocket at closing).
The SBA 504 Process for Michigan Businesses
Average timeline: 60-90 days from application to closing
Step 1: Initial Consultation & Property Identification (Days 1-7)
What happens:
Discuss your commercial real estate or equipment needs
Review preliminary qualifications (credit, financials, time in business)
Confirm property meets owner-occupancy requirements
Explain SBA 504 structure and timeline
Determine if 504 is the right fit vs. 7(a) or conventional
What you need:
Property identified or parameters defined
Basic financial information (revenue, time in business)
Personal credit score awareness
Understanding of your down payment capacity
Outcome: You'll know whether SBA 504 makes sense and what your approval odds are.
Step 2: Documentation Gathering & Application Preparation (Days 8-21)
What happens:
Receive comprehensive document checklist
Gather required business and personal documentation
Order property appraisal
Order Phase I environmental assessment (for real estate)
Prepare detailed business plan and loan application package
Required documents:
Business documentation:
Business tax returns (2 years)
Year-to-date profit & loss statement
Year-to-date balance sheet
Business plan or executive summary
Articles of incorporation / operating agreement
Business licenses
Personal documentation:
Personal tax returns (2 years)
Personal financial statement
Credit authorization
Resume / business experience summary
Property documentation:
Purchase agreement or letter of intent
Property details (address, square footage, use)
Current lease (if relocating from leased space)
Occupancy breakdown (if mixed-use property)
This phase is critical: Proper documentation and packaging significantly impacts approval odds and timeline.
Step 3: Bank & CDC Underwriting (Days 22-50)
What happens:
Bank conducts underwriting on their 50% portion
Certified Development Company (CDC) underwrites SBA portion
Both parties coordinate requirements
Third-party reports completed (appraisal, environmental)
Additional documentation requested if needed
Both lenders issue preliminary approvals
Common underwriting requests:
Updated financial statements
Explanation of credit issues
Additional business operational details
Equipment quotes and specifications
Construction budgets (for new construction)
Timeline: Most banks and CDCs complete underwriting in 20-30 days for straightforward deals.
Step 4: SBA Authorization (Days 51-75)
What happens:
CDC submits approved loan package to SBA
SBA reviews and authorizes the guarantee
SBA issues authorization number
Final closing documents prepared
All closing conditions finalized
Timeline: SBA authorization typically takes 10-15 business days once submitted.
Step 5: Closing & Funding (Days 76-90)
What happens:
Final documents signed by all parties
All closing conditions satisfied
Title work completed
Insurance in place
Funds disbursed
You take ownership of property
Total typical timeline: 60-90 days
Factors that can extend timeline:
Complex properties (environmental issues, zoning complications)
New construction projects (more moving parts)
Multiple properties in one transaction
Legal complications
Incomplete documentation
Factors that speed up timeline:
Complete documentation upfront
Clean environmental assessment
Straightforward property
Strong borrower financials
Experienced team managing process
Michigan Industries Using SBA 504 Loans
LVRG Business Funding has facilitated SBA 504 loans for Michigan businesses across diverse industries. Here are sectors where SBA 504 loans provide exceptional value:
Manufacturing (Michigan's #1 SBA 504 Category)
Michigan's manufacturing sector—from automotive suppliers to advanced manufacturing, food processing to metal fabrication—leads the state in SBA 504 loan volume.
What Michigan manufacturers finance with 504:
✓ Production facilities and industrial buildings
✓ Manufacturing equipment and machinery
✓ Warehouse and distribution space
✓ Facility expansions and renovations
Special manufacturing advantages:
SBA CDC portion up to $5.5 million (vs. $5M standard)
Equipment can be included with real estate
Job creation provides additional benefits
Energy-efficient upgrades qualify for $5.5M cap
Recent example: Sterling Heights automotive supplier purchased 50,000 sq ft facility + $2M in equipment for $8 million total project, 10% down, doubled production capacity, added 35 jobs.
Healthcare & Medical Practices
Medical offices, dental practices, veterinary clinics, and other healthcare providers throughout Michigan use SBA 504 to purchase their buildings.
Why SBA 504 works perfectly for healthcare:
✓ Stop paying rent and build equity
✓ 100% owner-occupied (meets 504 requirement easily)
✓ Fixed rates provide predictable occupancy costs
✓ Customize space to your exact specifications
✓ Build wealth alongside practicing medicine
Recent example: Grand Rapids multi-physician medical practice purchased 12,000 sq ft office building for $2.4 million, cut occupancy costs from $22,000/month rent to $15,000/month mortgage payment, built $350,000 in equity over 5 years.
Retail & Restaurants
Stores, restaurants, franchises, and specialty retail operations purchase storefronts and standalone buildings.
Benefits for Michigan retail businesses:
✓ Lock in prime locations permanently
✓ Control renovations and facility improvements
✓ Build equity vs. paying rent that disappears
✓ Create stable, predictable occupancy costs
Recent example: Ann Arbor restaurant acquired downtown building for $1.8 million, eliminated $15,000/month rent, secured prime location permanently, building appreciated $280,000 in 4 years.
Distribution & Warehousing
Distribution centers, logistics companies, and warehousing operations purchase facilities throughout Michigan.
Why 504 works for distribution:
✓ Large buildings ($3M-$10M+) fit 504 structure perfectly
✓ Material handling equipment can be included
✓ Fixed rates provide cost stability in volatile market
✓ Stop paying rent on expensive warehouse space
Recent example: Lansing industrial distributor bought 80,000 sq ft warehouse for $5.5 million, consolidated three leased locations into one owned facility, reduced occupancy costs 35%, increased inventory capacity 200%.
Professional Services
Law firms, accounting practices, engineering firms, architecture firms, and other professional services purchase office buildings.
Advantages for professional services:
✓ Stable cash flow makes approval straightforward
✓ Typically 100% owner-occupied
✓ Tax benefits of ownership
✓ Can rent extra space to offset costs
✓ Professional image of owning your building
Recent example: Metro Detroit law firm purchased 15,000 sq ft office building for $2.4 million, rented 40% of space to complementary tenants, net occupancy cost dropped 49% vs. previous lease.
Construction & Industrial Services
General contractors, specialty contractors, and industrial service companies purchase yards, shops, and office/warehouse combinations.
What construction companies finance:
✓ Contractor yards and equipment storage
✓ Shop buildings for repairs and fabrication
✓ Office/warehouse combinations
✓ Heavy equipment alongside buildings
Recent example: Oakland County HVAC contractor purchased 25,000 sq ft shop building + yard for $3.2 million, consolidated operations, added service bays, revenue increased 40%.
Real Michigan SBA 504 Success Stories
Manufacturing Expansion – Sterling Heights
The Business: Precision metal fabrication company, $8M annual revenue, automotive and aerospace clients
The Challenge: Operating in leased 35,000 sq ft facility, outgrew capacity, landlord wouldn't allow expansion, facing need to relocate or turn down business
The SBA 504 Solution:
Total project: $8,000,000 (land, building, equipment)
Bank loan: $4,000,000 (50%)
SBA CDC loan: $3,200,000 (40%)
Down payment: $800,000 (10%)
New facility: 65,000 sq ft owned facility
Monthly payment: $50,700 (vs. $28,000 previous rent)
The Outcome:
Moved to owned 65,000 sq ft facility (nearly double previous space)
Invested $1.5M in new CNC equipment and production line
Revenue grew from $8M to $13M in 18 months
Added 28 employees
Building appreciated $1.2M in 3 years
Now has equity and expansion capacity for decades
Owner's perspective: "We were maxed out in our leased space and our landlord wouldn't let us expand. The SBA 504 loan let us buy our own building with just 10% down, and the fixed rate on 40% of the loan means we don't have interest rate risk. We went from paying $28K rent to owning a $8M facility for $51K/month—and we own it. Best decision we ever made."
Medical Practice – Grand Rapids
The Business: Multi-physician medical practice, $4.5M annual revenue, established 15 years, growing patient base
The Challenge: Paying $32,000/month rent for 10,000 sq ft, landlord selling building, practice facing relocation or massive rent increase
The SBA 504 Solution:
Total project: $4,000,000 (building purchase + $400K renovation)
Bank loan: $2,000,000 (50%)
SBA CDC loan: $1,600,000 (40%)
Down payment: $400,000 (10%)
Building: 12,000 sq ft medical office building
Monthly payment: $25,300
The Outcome:
Purchased 12,000 sq ft building (20% more space than leased)
Saved $6,700/month in occupancy costs ($80,400 annually)
Customized facility to exact specifications
Built $400,000 in equity over 5 years
Eliminated landlord risk permanently
Now planning second location
Owner's perspective: "We were at the mercy of our landlord. When he decided to sell, we faced either relocating our established practice or paying whatever he wanted. The SBA 504 loan let us buy our own building with just $400K down on a $4M property. Now we're building equity, our costs are lower than our old rent, and we control our destiny."
Distribution & Logistics – Lansing
The Business: Industrial supply distributor, $6M annual revenue, serving manufacturing sector statewide
The Challenge: Operating from three leased warehouses totaling 50,000 sq ft, inefficient operations, combined rent $42,000/month, limited growth capacity
The SBA 504 Solution:
Total project: $5,300,000 (land + 80,000 sq ft warehouse + equipment)
Bank loan: $2,650,000 (50%)
SBA CDC loan: $2,120,000 (40%)
Down payment: $530,000 (10%)
Monthly payment: $33,800
The Outcome:
Consolidated three leased locations into one owned 80,000 sq ft facility
Saved $8,200/month in occupancy costs ($98,400 annually)
Doubled inventory capacity
Improved operational efficiency by 40%
Revenue increased from $6M to $9.2M in 30 months
Building appreciated $750,000 in 4 years
Added 15 employees
Owner's perspective: "Running three separate warehouses was killing our efficiency and our profitability. The SBA 504 loan let us buy one large facility that's 60% bigger than our combined leased space—for less than we were paying in rent. We doubled our inventory, streamlined operations, and our revenue grew 50%. The business transformation was incredible."
Restaurant Group – Ann Arbor
The Business: Established restaurant, $2.8M annual revenue, prime downtown location, 20-year successful operation
The Challenge: Landlord raising rent from $15,000/month to $22,000/month, building for sale, restaurant risked losing prime location or facing massive rent increase
The SBA 504 Solution:
Total project: $1,800,000 (building purchase + kitchen upgrades)
Bank loan: $900,000 (50%)
SBA CDC loan: $720,000 (40%)
Down payment: $180,000 (10%)
Building: 5,000 sq ft downtown restaurant building
Monthly payment: $11,500
The Outcome:
Purchased building in prime downtown Ann Arbor location
Monthly payment of $11,500 vs. proposed $22,000 rent (saved $10,500/month)
Saved $126,000 annually in occupancy costs
Controlled property for future expansion or sale
Building appreciated $280,000 in 4 years
Secured location permanently in high-demand area
Owner's perspective: "Our landlord was going to more than double our rent. After 20 years building our business, we were going to lose our location or pay an impossible rent. The SBA 504 loan saved our business. We bought the building for less than the proposed rent, and now we own a valuable downtown property that's appreciated significantly. We're building wealth, not making a landlord rich."
Frequently Asked Questions: SBA 504 Loans in Michigan
Can I use an SBA 504 loan to buy a business?
No. SBA 504 loans can ONLY be used for commercial real estate and equipment—not business acquisitions.
If you want to buy a business, you need an SBA 7(a) loan instead. If you want to buy a business AND the real estate it operates from, you can structure the transaction with an SBA 7(a) loan that covers both the business purchase and the real estate.
Can I include working capital in an SBA 504 loan?
No. SBA 504 loans are strictly for real estate and equipment purchases. They cannot include working capital.
If you need working capital along with real estate or equipment, an SBA 7(a) loan is the right choice. The 7(a) program allows you to finance real estate, equipment, AND working capital in a single loan.
Can I rent part of my building to other tenants?
Yes, as long as you occupy at least 51% of the property for your own business operations.
You can rent up to 49% of the space to other tenants. The rental income can actually help you qualify by reducing your net occupancy cost.
Examples:
You buy a 10,000 sq ft building, use 6,000 sq ft (60%) for your business, rent 4,000 sq ft to tenants ✓
You buy a mixed-use building with retail on first floor and apartments above, and your business occupies 55% of total square footage ✓
You buy a building intending to occupy it 100% now, but might rent part of it in the future ✓
How long does it take to close an SBA 504 loan?
Typical timeline: 60-90 days from complete application to closing
Breakdown:
Documentation and application: 7-14 days
Bank and CDC underwriting: 20-30 days
SBA authorization: 10-15 days
Closing preparation and funding: 10-15 days
Factors that extend timeline:
Environmental issues requiring remediation
Complex properties or new construction
Incomplete documentation
Multiple properties in one transaction
Factors that speed up timeline:
Complete documentation upfront
Clean environmental assessment
Strong borrower financials
Straightforward property
Experienced team managing the process
What credit score do I need for an SBA 504 loan?
680+ credit score is strongly preferred for SBA 504 loans.
650-680 is possible with strong compensating factors:
Excellent cash flow (1.4x+ DSCR)
Substantial collateral
Long time in business (5+ years)
Large down payment (15-20%)
Clean explanation for credit issues
Below 650 is very difficult for SBA 504. You'd need exceptional business strength and compensating factors, or you should focus on improving credit before applying.
Can I refinance my existing commercial mortgage with an SBA 504 loan?
Generally no, unless combined with substantial expansion or improvement.
SBA 504 loans are designed for purchasing real estate and equipment—not refinancing existing debt.
Exception: If you're refinancing AND making a substantial improvement (typically 15-20%+ new investment in expansion, renovation, or equipment), refinancing may be allowed as part of a larger 504 project.
Example that works:
Current building value: $2M with $1.5M mortgage
Major expansion adding $1M (50% new investment)
Total project: $3M
Can refinance existing $1.5M mortgage + finance $1M expansion
Example that doesn't work:
Current building value: $2M with $1.5M mortgage at 8%
Want to refinance to lower rate
No expansion or substantial improvement
This doesn't qualify for SBA 504
For straight refinancing without expansion, consider conventional refinancing or explore whether SBA 7(a) debt refinancing might work.
What happens if I'm declined by one bank for SBA 504?
A decline from one bank doesn't mean you don't qualify for SBA 504.
Different banks have different:
Credit risk appetites
Industry preferences
Geographic focus areas
Loan size sweet spots
Portfolio capacity at any given time
We've funded hundreds of Michigan businesses that were initially declined elsewhere by matching them with the right bank and CDC combination and properly packaging their applications.
If you're declined, the key is understanding why and either addressing the issue or finding a better-fit lender.
Can a startup business get an SBA 504 loan?
Very difficult, but not impossible.
Startups face significant hurdles for SBA 504:
Need 15-20% down payment (vs. 10% for established businesses)
Require 700+ credit score
Must demonstrate significant industry experience (typically 5+ years)
Need comprehensive business plan with realistic projections
Face much greater scrutiny
Most startups are better served by:
SBA 7(a) loans (more startup-friendly)
Conventional financing
Building business history (operate 2+ years), then apply for 504
If you're a startup, we'll be honest about your approval odds and recommend the best path forward.
What if my business doesn't meet the 51% occupancy requirement?
Then SBA 504 doesn't work for you.
The 51% owner-occupancy requirement is non-negotiable for SBA 504 loans. If you can't or won't occupy at least 51% of the property for your own business operations, you need a different financing solution:
Alternatives:
Conventional commercial mortgage
Portfolio loans from community banks
Private commercial lenders
CMBS loans (for larger properties)
Ready to Purchase Your Michigan Commercial Real Estate with SBA 504?
Stop paying rent. Stop building someone else's equity. Stop worrying about lease renewals and landlord decisions.
Start building wealth. Start owning your business future. Start controlling your destiny.
SBA 504 loans provide Michigan businesses with:
✓ 10% down payment (not 30%)
✓ Fixed rates for 25 years (not variable rates that adjust)
✓ No balloon payments (fully amortized)
✓ Lower monthly payments (vs. conventional financing)
✓ Preserved working capital (less cash required upfront)
Three Ways to Get Started
1. Call Our Michigan SBA 504 Team 📞 (855) 998-5874
Speak directly with an SBA 504 specialist who understands Michigan commercial real estate. Available Monday-Friday, 9am-6pm EST.
2. Email Your Property Details ✉️ info@lvrgllc.com
Tell us about the property you want to buy and your business. We respond within 24 hours with preliminary feedback and next steps.
3. Complete Our Quick Form
We'll contact you within 24 hours with a preliminary assessment and next steps.
What Happens Next
Within 24 hours of contacting us:
✓ Know whether you qualify for SBA 504 financing
✓ Estimated loan structure and monthly payments
✓ Timeline to closing
✓ Documentation requirements
✓ Next steps
Within 60-90 days:
✓ You close on your property
✓ You own your building
✓ You stop paying rent
✓ You start building equity
About LVRG Business Funding
LVRG Business Funding is Michigan's trusted partner for SBA 504 loans and commercial real estate financing. Based in Metro Detroit with deep roots throughout Michigan, we've spent over 20 years helping Michigan businesses stop paying rent and start building wealth through commercial real estate ownership.
Our SBA 504 Approach:
No cost to you: Lenders compensate us—you get expert guidance at zero cost
CDC and bank network: Strategic relationships with Michigan's most capable SBA 504 lenders
Michigan expertise: Deep understanding of Michigan commercial real estate markets
Proven results: $1 billion+ facilitated in business financing for 10,000+ companies
Our SBA 504 Specialization:
Manufacturing facilities (Michigan's #1 504 category)
Medical and dental office buildings
Warehouses and distribution centers
Retail buildings and storefronts
Office buildings for professional services
Mixed-use properties
Equipment financing alongside real estate
Michigan Markets We Serve: Detroit, Sterling Heights, Warren, Troy, Livonia, Dearborn, Westland, Farmington Hills, Southfield, Royal Oak, Grand Rapids, Ann Arbor, Lansing, Kalamazoo, Flint, Battle Creek, and throughout Michigan's 83 counties.
Ready to stop paying rent and own your building? Contact LVRG Business Funding today.
📞 (855) 998-5874 | ✉️ info@lvrgllc.com
This guide is for informational purposes only and does not constitute financial advice. SBA 504 loan terms, rates, and requirements are subject to change and depend on individual borrower qualifications, property characteristics, and lender criteria. LVRG Business Funding works with Certified Development Companies (CDCs) and SBA-approved lenders to facilitate SBA 504 financing but is not itself a lender or CDC.