SBA Loan Comparison Guide
SBA 504 vs SBA 7(a) Loans: Which Is Right for Your Commercial Property?
The SBA 504 and SBA 7(a) programs both finance owner-occupied commercial real estate, but they price, amortize, and structure differently. This side-by-side comparison covers interest rate structure, down payment, loan size limits, and the use cases each program is designed for — so you can pick the right one before you apply.
Side-by-Side Comparison
| Feature | SBA 504 | SBA 7(a) |
|---|---|---|
| Primary use | Owner-occupied commercial real estate, ground-up construction, and heavy equipment (10+ year life). | General business purposes — working capital, partner buyouts, business acquisitions, and CRE. |
| Maximum loan size | Project costs up to ~$15M+ (SBA debenture portion up to $5M / $5.5M manufacturing). | $5,000,000 (program cap). |
| Down payment | 10% borrower equity (15% for single-purpose or new business; 20% for both). | 10%–15% typical, sometimes higher for CRE; lender discretion. |
| Interest rate structure | Fixed for 25 years on the SBA debenture (CDC portion); bank's first lien priced separately. | Variable, tied to Prime + a spread; capped by SBA maximums. |
| Term | 25 years, fully amortizing on the SBA portion. | 25 years for real estate, 10 years for equipment, 7 years for working capital. |
| Eligible real estate | ≥51% owner-occupancy required (existing) / 60% (new construction with 10-year build-out). | ≥51% owner-occupancy required for CRE. |
| Prepayment penalty | Declining 10-year penalty on the SBA debenture. | Declining 3-year penalty for loans with terms ≥15 years. |
| Best for | Buying or building owner-occupied CRE with long-term rate certainty. | Flexible business financing where CRE is one component. |
When to Choose SBA 504
- Buying or building owner-occupied commercial real estate.
- You want a fixed 25-year rate on a large portion of the loan.
- You want to preserve working capital (10% down).
- Project cost exceeds the 7(a) $5M cap.
When to Choose SBA 7(a)
- Financing a business acquisition (with or without real estate).
- You need working capital or partner buyout proceeds combined.
- Speed matters — single-lender structure closes faster.
- Total project cost is within the $5M cap.
Frequently Asked Questions
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