The December 2025 SBA 504 loan rate for the 25-year term reached 6.05% (5.86% for manufacturers), marking the lowest level since September 2024. For business owners considering commercial real estate purchases, this represents a meaningful opportunity to lock in long-term fixed-rate financing at improved terms.
If Federal Reserve easing continues as anticipated, we may see these rates drop further in the months ahead.
What the November 2025 Rates Mean
The 25-year SBA 504 rate has been on a downward trajectory since peaking earlier in 2025. Here's how December compares to recent months:
2025 Rate Trend (25-Year Term):
- January: 6.73%
- April: 6.65%
- July: 6.58%
- September: 6.21%
- October: 6.15%
- November: 6.09% (5.88% for manufacturers)
- December: 6.05% (5.86% for manufacturers)
The December rate represents a decline of more than 65 basis points from the start of 2025 and sits at the lowest point since September 2024, when rates briefly dipped to 5.76% before climbing back up through the fall.
Why Manufacturers Get a Better Rate
Starting in fiscal year 2026 (October 2025), the SBA waived the annual service fee for manufacturing businesses, resulting in rates approximately 25 basis points lower than non-manufacturing projects. This brings the December 2025 rate for manufacturers to 5.86% for the 25-year term.
To qualify for the manufacturing rate, a business must have a primary NAICS code in sectors 31, 32, or 33. This includes businesses engaged in the mechanical, physical, or chemical transformation of materials into new products.
How 504 Rates Are Determined
Unlike conventional loans where lenders set rates based on their own criteria, SBA 504 rates are determined by the bond market. Each month, the SBA pools 504 loans from CDCs across the country and sells them to institutional investors as government-guaranteed debentures.
The rate is pegged to an increment above the 10-year U.S. Treasury yield, plus servicing fees to the SBA, CDC, and central servicing agent. Because 504 debentures are backed by the full faith and credit of the United States, investors accept lower yields than they would for conventional commercial mortgage securities.
This structure is what allows 504 loans to consistently offer below-market rates compared to conventional commercial real estate financing.
The Federal Reserve Factor
The Federal Reserve cut its key interest rate by 25 basis points at its December 2025 meeting, bringing the federal funds rate to a range of 3.50% to 3.75%. This was the third consecutive rate cut following reductions in September and October 2025.
While the Fed's short-term rate doesn't directly set 504 loan rates (which are tied to longer-term Treasury yields), Fed policy influences the broader interest rate environment. When the Fed signals continued easing, it can put downward pressure on Treasury yields, which in turn affects 504 debenture pricing.
The Fed's December 2025 projections indicate one additional 25-basis-point cut in 2026 and another in 2027, though committee members showed significant disagreement about the pace of future reductions. Chair Jerome Powell noted that the Fed is "well positioned to wait and see how the economy evolves," suggesting a more cautious approach going forward.
What This Means for Timing
504 rates can move in either direction from month to month. The rate you receive is locked when your loan funds, not when you apply. This creates both opportunity and uncertainty for borrowers.
Reasons rates could continue falling:
- Continued Fed easing in 2026
- Declining inflation expectations
- Weakening economic data
Reasons rates could rise:
- Inflation remaining elevated above the Fed's 2% target
- Stronger-than-expected economic growth
- Changes in investor demand for government securities
For context, consider the range of 504 rates over the past few years:
- 2021 average: Around 2.9% (historic lows)
- 2022 range: 3.2% to 6.5% (rapid increase)
- 2023 range: 5.9% to 7.1%
- 2024 range: 5.8% to 6.7%
- 2025 YTD: 5.9% to 6.5%
Current rates remain well above the pandemic-era lows but are trending in a favorable direction compared to the peaks seen in late 2023.
The 504 Rate Advantage Over Conventional Financing
Even at current levels, 504 rates compare favorably to conventional commercial real estate financing options:
SBA 504 (December 2025):
- 25-year term: 6.05% fixed for the full term
- 20-year term: 6.07% fixed for the full term
- 10-year term (equipment): 5.62% fixed for the full term
Conventional commercial mortgages (typical range):
- 5 to 7-year terms with balloon payments
- Rates of 6.4% to 9.0% depending on property type
- Often require refinancing before loan maturity
The key advantage of 504 financing isn't just the rate itself, but the combination of rate, term, and structure. A 25-year fixed rate eliminates refinancing risk and provides payment predictability that conventional financing simply cannot match.
Monthly Payment Impact
To illustrate what these rates mean in practice, consider a $1 million 504 loan (the SBA/CDC portion of a larger project):
At 6.09% for 25 years:
- Monthly payment: approximately $6,520
- Total interest over life of loan: approximately $956,000
At 6.50% for 25 years:
- Monthly payment: approximately $6,750
- Total interest over life of loan: approximately $1,025,000
The 41 basis point difference saves roughly $230 per month and approximately $69,000 over the life of the loan and eliminates interest rate risk. Most lenders will only fix rates for five years, exposing you to interest rate changes.
For a typical 504 project where the SBA portion represents 40% of total financing, a $2.5 million project would have a $1 million SBA loan, making these savings quite meaningful.
Should You Lock in Current Rates?
The decision to move forward with a 504 loan should be based on your business needs and readiness, not on rate speculation. That said, current rates are objectively favorable compared to recent history.
Consider moving forward if:
- You have identified a property or project that meets your business needs
- Your business meets 504 eligibility requirements
- You can provide the required 10% down payment (or 15% for special purpose properties)
- The property will be at least 51% owner-occupied (60% for new construction)
Consider waiting if:
- You're still searching for the right property
- Your business financials need strengthening before applying
- You have significant projects or changes planned that could affect your creditworthiness
Remember that 504 loan approval and funding typically takes 60 to 90 days, so the rate you see today won't necessarily be the rate you receive at closing.
How to Get Started
If current rates have you thinking about commercial real estate, the first step is to connect with a Certified Development Company (CDC) that can evaluate your situation and explain your options.
New England Certified Development Corporation has been helping businesses access SBA 504 financing since 1981 and can help you understand how current rates translate to your specific project. Whether you're purchasing an existing building, constructing a new facility, or refinancing existing commercial mortgage debt, they can walk you through the numbers.
Additional rate advantages available:
- VetLoan Advantage Program: Veterans pay a reduced CDC fee of 1.0% instead of the standard 1.5%, and CDC New England pays half of the third-party lender origination fee up to $3,000
- Manufacturing rate: Businesses with qualifying NAICS codes receive rates approximately 25 basis points lower
Contact New England Certified at (781) 928-1100 or visit cdcnewengland.com to discuss your project and get a rate estimate based on current market conditions.
The Bottom Line
November 2025 brought 504 rates to their lowest level in more than a year, with the 25-year rate at 6.09% (5.88% for manufacturers). While no one can predict with certainty where rates will go from here, the current environment is favorable compared to recent history.
For businesses that have been considering commercial real estate purchases, the combination of improved rates and the long-term certainty of 504 financing makes this a reasonable time to explore your options. The 25-year fixed rate eliminates the refinancing risk that comes with conventional commercial loans, providing stability regardless of where rates go in the future.
SBA 504 rates are set monthly based on debenture pricing. The rate you receive depends on when your loan funds. This article is for informational purposes only. Contact a Certified Development Company for current rates and program requirements.
