SBA loans dramatically lower down payments and lengthen terms on business and owner-occupied real estate. But 7(a) and 504 are built for different jobs.
SBA 7(a) — the general-purpose workhorse
- Loan size: up to $5M.
- Use: business acquisition, working capital, equipment, owner-occupied RE, refinance.
- Down payment: 10% minimum.
- Rate: floating, Prime + 2.75–3.0 (~10.5% at Prime 7.5%).
- Term: 10 yr working capital, 25 yr on RE.
- Guarantor: all 20%+ owners personally guarantee.
Best for: buying a business, business + real estate combos, refinancing high-cost debt.
SBA 504 — real estate and heavy equipment
- Loan size: up to $5.5M SBA piece (total project can be $15M+).
- Structure: 50% bank first + 40% SBA CDC second + 10% borrower down.
- Rate: low-5s to mid-6s fixed on the SBA piece.
- Term: 25 yr fully amortizing on real estate.
- Use: owner-occupied real estate purchase or construction, equipment ≥ 10-yr useful life.
Best for: buying or building the property your business occupies.
Side-by-side
| Feature | 7(a) | 504 |
|---|---|---|
| Rate structure | Floating | Fixed on SBA piece |
| Max size | $5M | $5.5M SBA (+bank first) |
| Down payment | 10% | 10% |
| Business acquisition | ✅ | ❌ (RE only) |
| Working capital | ✅ | ❌ |
| Prepay penalty | Small on <15 yr | Long on 504 (10-yr declining) |
| Closing time | 45–75 days | 60–120 days |
The play
- Buying a franchise or existing business? 7(a).
- Buying the building your business occupies? 504 for the RE piece, 7(a) for the business.
- Refinancing existing owner-occupied debt at a lower fixed rate? 504 refi program.
Requirements common to both
- 51% owner-occupancy on real estate deals.
- Personal guarantee from every 20%+ owner.
- Two years of profitable business (or a strong business plan for acquisitions).
- Reasonable liquidity post-close.