Updated November 10, 2026
Quick answer
The CDC's 504 debenture amortizes fully with a fixed payment over 10, 20 or 25 years, so there is no balloon on that piece. As an illustration, a $620,000 debenture at an assumed 6.5% over 25 years is about $4,186 a month, with about $480,570 left after year 10. The bank's first mortgage runs on its own, often shorter, schedule. These are typical figures, not a quote; Axiant Partners, a business-loan broker in Boca Raton, compares 504 lenders.
How a 504 Loan Amortizes
A 504 project has two loans with two schedules. The bank's first mortgage covers about 50% of the project. The Certified Development Company (CDC) loan covers about 40% and is funded by an SBA-guaranteed debenture. You put in about 10%. The SBA side is the predictable one: the debenture carries one fixed rate for its whole term and pays down to zero with level payments. The bank sets its own rate, amortization and maturity, and that is where a balloon or a rate reset usually comes from.
| Piece | Share of project | How it pays down |
|---|---|---|
| Bank first mortgage | About 50% | Bank's terms; often amortized 20-25 years with a 5-10 year maturity or reset |
| CDC debenture | About 40% | Fixed rate, level payments, fully amortized over 10, 20 or 25 years |
| Your injection | About 10% | Paid at closing; more for some startups and special-purpose buildings |
The 10-year debenture is used for equipment; 20- and 25-year debentures are for real estate. For how the rate is set, see SBA 504 loan rates, and for the program itself, what an SBA 504 loan is.
Worked Example: The Full 25-Year Debenture Schedule
Illustrative, not a quote. Take a $1,500,000 owner-occupied building. The net CDC share is 40%, or $600,000. Financed fees are added on top, so assume a $620,000 debenture (how fees are added is shown step by step on our 504 fees page). At an assumed 6.5% effective rate over 25 years, the payment is about $4,186.28 a month, or about $50,235 a year.
| Year | Interest paid | Principal paid | Balance at year end |
|---|---|---|---|
| 1 | $39,999 | $10,237 | $609,763 |
| 2 | $39,313 | $10,922 | $598,841 |
| 3 | $38,582 | $11,654 | $587,187 |
| 4 | $37,801 | $12,434 | $574,753 |
| 5 | $36,968 | $13,267 | $561,485 |
| 6 | $36,080 | $14,156 | $547,330 |
| 7 | $35,132 | $15,104 | $532,226 |
| 8 | $34,120 | $16,115 | $516,111 |
| 9 | $33,041 | $17,194 | $498,916 |
| 10 | $31,889 | $18,346 | $480,570 |
| 11 | $30,661 | $19,575 | $460,996 |
| 12 | $29,350 | $20,886 | $440,110 |
| 13 | $27,951 | $22,284 | $417,826 |
| 14 | $26,459 | $23,777 | $394,049 |
| 15 | $24,866 | $25,369 | $368,680 |
| 16 | $23,167 | $27,068 | $341,612 |
| 17 | $21,354 | $28,881 | $312,731 |
| 18 | $19,420 | $30,815 | $281,915 |
| 19 | $17,356 | $32,879 | $249,036 |
| 20 | $15,154 | $35,081 | $213,955 |
| 21 | $12,805 | $37,430 | $176,525 |
| 22 | $10,298 | $39,937 | $136,588 |
| 23 | $7,624 | $42,612 | $93,976 |
| 24 | $4,770 | $45,466 | $48,511 |
| 25 | $1,725 | $48,511 | $0 |
Two things stand out. In year 1, about 80% of what you pay is interest; principal doesn't pass interest until year 15. And after 10 years you still owe about 78% of the original debenture, which matters if you plan to sell or refinance. Total interest over 25 years is about $635,885 at this rate. Figures come from standard monthly amortization and are rounded to the dollar.
10 vs 20 vs 25 Years: Payment and Total Interest
Same $620,000 and the same assumed 6.5%, so only the term changes. In practice longer debentures often price a little differently, so treat this as a comparison of terms, not of quotes.
| Debenture term | About per month | Total interest |
|---|---|---|
| 10 years | $7,039.97 | $224,797 |
| 20 years | $4,622.55 | $489,413 |
| 25 years | $4,186.28 | $635,885 |
Going from 20 to 25 years lowers the payment by about $436 a month but adds about $146,000 of interest. The 25-year term mostly helps debt service coverage, the ratio lenders test against your cash flow. If coverage is comfortable, the 20-year term costs far less over time.
The Bank Piece and Its Balloon
The schedule above is only the SBA side. Keep the same project and assume the bank lends $750,000 at 7.75%, amortized over 25 years but maturing in 10. The payment is about $5,664.97 a month, so the two loans together come to about $9,851 a month.
| Bank loan | About |
|---|---|
| Monthly payment | $5,664.97 |
| Balance after 5 years | $690,051 |
| Balance after 10 years | $601,839 |
If the note matures at year 10, about $601,839 is due or has to be refinanced, while the debenture keeps paying down on schedule. Some banks reset the rate instead of maturing the loan. Ask for the bank's term, amortization and maturity in writing and model them separately. Our SBA 504 lenders guide covers what to compare on the bank half.
Paying Off a 504 Debenture Early
The debenture can be prepaid, but SBA Form 1504 allows it only as a whole, not in part, and adds a repurchase premium in the early years. The premium is the remaining balance times the debenture's stated interest rate times a factor that falls each year:
| Debenture term | Factor by year | No premium from |
|---|---|---|
| 20 or 25 years | 1.00 in year 1, then down 0.10 a year to 0.10 in year 10 | Year 11 |
| 10 years | 1.00 in year 1, then down 0.20 a year to 0.20 in year 5 | Year 6 |
Using the example's balance and, for simplicity, 6.5% as the stated rate: paying off in year 4 (after about $587,187 is left at the end of year 3) costs about $587,187 x 0.065 x 0.70, or $26,717. In year 7 it's about $14,231. From year 11 it's zero. The stated rate on the debenture is lower than the all-in effective rate, so a real premium would usually come in a bit under these figures. The bank loan has its own prepayment terms, which vary by lender. If a sale is likely within a few years, see SBA 504 refinance and compare the premium with the rate you'd save.
How to Build Your Own 504 Schedule
- Get the gross debenture amount. Ask the CDC for the gross figure, which includes financed fees, not the net 40%.
- Use the effective rate. The CDC can quote the all-in rate that includes ongoing servicing and SBA annual fees.
- Pick the term. 25 or 20 years for real estate, 10 for equipment.
- Model the bank loan separately. Use its rate, its amortization and its maturity date.
- Add the two payments. Test the total against your cash flow, the way the lenders will.
The SBA loan calculator handles either piece. To compare real pairings of bank and CDC terms, get matched with SBA 504 lenders or call (561) 268-0465. Rates change, and approval is up to the lender and SBA.
Frequently Asked Questions
Does an SBA 504 loan have a balloon payment?
The CDC debenture doesn't: it amortizes fully over 10, 20 or 25 years with a fixed payment. The bank's first mortgage can. Many are amortized over 20 to 25 years but mature or reset after 5 to 10, so check the bank's maturity date.
What is the monthly payment on an SBA 504 loan?
It depends on the debenture amount, rate and term, plus the bank loan. As an illustration, a $620,000 debenture at 6.5% is about $4,186 a month over 25 years, $4,623 over 20 and $7,040 over 10. A $750,000 bank loan at 7.75% over 25 years adds about $5,665.
How much of a 504 loan is paid off after 10 years?
On a 25-year debenture at about 6.5%, roughly 22%. In the example, $620,000 falls to about $480,570 after 10 years. A 20-year debenture pays down faster because more of each payment goes to principal.
Is there a prepayment penalty on an SBA 504 loan?
Yes, on the debenture for the first half of the term. SBA Form 1504 sets a premium of the balance times the stated rate times a factor: 1.00 in year 1, falling 0.10 a year to zero from year 11 on 20- and 25-year debentures, and falling 0.20 a year to zero from year 6 on 10-year debentures.
Can you make extra payments on a 504 debenture?
The debenture form allows repurchase as a whole, not in part, so a partial prepayment doesn't work the way it does on many bank loans. Ask the CDC how it handles extra payments. The bank loan follows the bank's own terms.
Sources & Further Reading
- SBA Form 1504: Debenture — The debenture form, including the repurchase premium schedule for 10-, 20- and 25-year debentures.
- SBA SOP 50 10 8.1 (effective October 1, 2026) — The SBA's rules for 7(a) and 504 loans, including equity injection, Appendix 15 on changes of ownership, and eligibility.
- SBA 504 Loans — Fixed-rate financing for real estate and long-term equipment through Certified Development Companies.
- 13 CFR 120.971: Allowable fees paid by Borrower — The servicing, late and other fees a CDC may charge over the life of the loan.
Figures above describe ranges commonly seen across lenders and reflect published guidance as of the date on this page. Confirm current terms with the cited source or your lender before acting.