Reviewed by Craig Hoebing, AZ Commercial Mortgage Banker CMB-1047342 · Updated October 2026
Sponsors searching for an Arizona 504 loan usually want the shape of the program, not a rate. SBA's own materials and Standard Operating Procedure 50 10 describe a project in which a private lender holds the first lien and a certified development company funds a second lien with a debenture sold to investors. SBA's guarantee is on that debenture. The CDC is the 504 lender of record. A commercial mortgage banker can help a borrower compare that structure with a conventional bank loan. The banker is not a substitute for either signature.
Capital Market Funds is a Scottsdale commercial mortgage banker, Arizona license CMB-1047342, NMLS 1445066. The firm arranges financing. It is not an SBA lender, not a CDC, and not a preferred lender. Arizona has locally active CDCs; this page does not name a partnership with any of them and does not imply one. If a CDC is the right counterparty, the file goes to that CDC and to the bank that will hold the first mortgage.
How to read the split
The familiar 50 / 40 / 10 picture is a ceiling and a floor, not a coupon. Up to about half the project is the bank. Up to about 40 percent is the debenture. At least 10 percent is the borrower's cash or eligible equity. A business that is less than two years old, or a property SBA treats as special purpose, generally injects 15 percent. Both conditions together generally mean 20 percent. Those percentages are program rules. They are not a quote of what a specific bank will advance on a specific building in Mesa or Tucson.
Occupancy is the other gate. An existing building is generally expected to be at least 51 percent occupied by the operating company. New construction is generally expected to start at 60 percent owner occupancy. A sponsor who wants to lease most of the building to unrelated tenants is describing an investment property. That request belongs on a bank, life company, or CMBS path, not on a 504 application padded with a small owner suite.
The debenture term is 10, 20, or 25 years. The bank's note is whatever that bank negotiates: often a shorter maturity, sometimes a reset, and always its own prepayment language. Borrowers who hear '504 is fixed for 25 years' have heard only the debenture half. Ask which lien is fixed, for how long, and what happens to the bank piece at its maturity.
Prepayment, without pretending it is 10 percent
The debenture can be prepaid. During the first half of a 20- or 25-year term, SBA Form 1504 applies a premium equal to the remaining debenture principal times the interest rate printed on the debenture times a factor that starts at 1.00 and declines by 0.10 each year through year 10. From year 11 the factor is zero. A 10-year debenture uses factors 1.00, 0.80, 0.60, 0.40, and 0.20, then zero from year 6. People nickname the longer schedule 10-9-8-7-6-5-4-3-2-1 because the factor drops by a tenth. The nickname is not a statement that year one costs 10 percent of the balance.
The full payoff the central servicing agent calculates also includes accrued interest, fees, and the semi-annual window around the debenture payment date. The estimator on this site computes only the premium factor from numbers you type. It is not that payoff letter. The bank's first mortgage may have yield maintenance, a step-down, or no penalty at all. Add the two liens before you decide a refinance saves money. The prepayment estimator keeps those calculations in separate blocks for that reason.
What this page will not tell you
It will not tell you today's debenture rate. 504 pricing is set when the debenture is sold, and publishing a stale coupon would be worse than publishing none. It will not tell you the current maximum debenture amount. SBA adjusts those caps; the CDC and the SOP in effect on the day of application control. It will not tell you that every Arizona small business qualifies. Credit, eligibility of the business, and the use of proceeds are the CDC's underwriting.
Rural owner-users who fail the 504 occupancy or eligibility story sometimes look at a USDA Business & Industry guarantee instead. That is a different program, made by a USDA-approved lender, described on the USDA B&I page. It is not a fallback this firm funds.
A printable sheet of the same structure is linked below. It is the same facts in less prose, not a second opinion and not an application.
| Who makes the loans | A third-party lender, often a bank, makes the first mortgage. A certified development company makes the 504 loan, funded by a debenture that SBA guarantees. Capital Market Funds is neither the lender nor the CDC. |
|---|---|
| Typical project split | A common structure is 50 percent third-party lender, up to 40 percent CDC/debenture, and at least 10 percent borrower injection. Injection rises to 15 percent for a new business or a special-purpose property, and to 20 percent when both apply. SBA's SOP controls the file in front of you. |
| Occupancy | Existing buildings generally must be at least 51 percent owner-occupied. New construction generally must be at least 60 percent owner-occupied, with a path to more occupancy over time. An investment property leased to unrelated tenants is a different loan. |
| Debenture term | The CDC debenture is 10, 20, or 25 years. The bank's first mortgage has its own term, rate, and prepayment language. Do not treat them as one coupon. |
| Prepayment | SBA Form 1504 sets a declining premium on the debenture for the first half of a 20- or 25-year term (through year 10) and for the first five years of a 10-year debenture. The premium is remaining principal times the debenture rate times a year factor. It is not 10 percent of principal. The bank note is separate. The estimator shows only the debenture factor. |
| Use | Owner-users buying, building, or improving the real estate they operate from, and certain eligible equipment and refinances the program allows. Job creation or another public-policy goal is part of the CDC's test. This page does not restate a jobs-per-dollar ratio. |
Source: SBA Standard Operating Procedure 50 10 and SBA Form 1504, as those documents describe the program. Confirm the version in effect when a file is submitted. This table is not a commitment.
Questions
- Does Capital Market Funds make SBA 504 loans?
- No. An SBA lender makes the first mortgage and a CDC makes the 504 loan. This firm arranges and compares financing. It is not a CDC.
- Is the 504 prepayment 10 percent of the balance in year one?
- No. On a 20- or 25-year debenture the year-one factor is 1.00 times the debenture interest rate, applied to the remaining principal. That is one year of interest at the debenture rate, not 10 percent of principal.