SBA Loan for Commercial RE (2026)

What Is an SBA Loan for Commercial Real Estate?

An SBA loan for commercial real estate is a government-backed financing solution designed to help small businesses purchase, construct, or renovate commercial property. The Small Business Administration does not lend money directly. Instead, it guarantees a portion of loans made by approved lenders, reducing risk and enabling more favorable terms for borrowers.

These loans are specifically structured for owner-occupied commercial properties, meaning your business must occupy at least 51% of the space. This requirement ensures the program serves its intended purpose: helping small businesses grow by acquiring their own facilities rather than paying rent indefinitely.

The SBA offers two primary programs for commercial property financing: the SBA 504 loan and the SBA 7(a) loan. Each serves different needs and offers unique advantages, which we will explore in detail throughout this guide.

For business owners tired of rising lease costs or seeking to build equity in their own property, an SBA commercial property loan represents one of the most accessible paths to ownership. With down payments as low as 10% and terms up to 25 years, these programs make commercial real estate ownership achievable for businesses that might not qualify for conventional financing.

If you are exploring your options for commercial property financing, our SBA loan programs page provides a complete overview of what Clearhouse Lending offers.

What Are the Two Types of SBA Commercial Property Loans?

Understanding the difference between SBA 504 and SBA 7(a) loans is essential for choosing the right financing for your commercial real estate purchase. While both programs can fund property acquisitions, they differ significantly in structure, rates, and ideal use cases.

SBA 504 Loan

The SBA 504 loan is specifically designed for major fixed asset purchases, including commercial real estate and heavy equipment. This program features a unique three-party structure:

Bank loan (50%): A conventional lender provides half the financing as a first-position mortgage
CDC loan (40%): A Certified Development Company approved by the SBA finances the second portion
Borrower down payment (10%): You contribute the remaining 10% as equity

This structure creates a blended rate that is typically lower than conventional commercial mortgages. The CDC portion carries a fixed rate locked for the entire loan term - currently around 5.85% for 25-year terms as of January 2026.

Maximum loan amounts reach 5.5 million dollars for most projects, with terms of 10, 20, or 25 years available. The fixed-rate nature of the 504 program provides payment predictability that many business owners find invaluable for long-term planning.

SBA 7(a) Loan

The SBA 7(a) loan offers more flexibility but with different trade-offs. This program can finance commercial real estate purchases, but it can also cover working capital, equipment, inventory, and business acquisitions - all within the same loan.

Key characteristics of the 7(a) program include:

Maximum loan amount of 5 million dollars
Variable interest rates tied to the prime rate (typically prime plus 2.25% to 2.75%)
Terms up to 25 years for real estate
Faster approval process (30-60 days versus 60-90 days for 504 loans)

The 7(a) program works well for borrowers who need flexibility or want to combine real estate financing with other business needs. However, the variable rate means your payment could increase over time as interest rates change.

For a deeper understanding of how commercial loan rates work, see our guide on commercial loan interest rates.

How Much Can You Borrow With an SBA Commercial Property Loan?

Loan limits depend on which SBA program you choose and your specific project needs. Here is what you need to know about maximum borrowing amounts.

SBA 504 Loan Limits:

Standard maximum: 5.5 million dollars for the CDC portion
Total project financing: Up to 20 million dollars when combined with conventional lender participation
Small manufacturers: May qualify for up to 5.5 million dollars without the standard caps
Energy projects: Public policy projects can access up to 5.5 million dollars per project

SBA 7(a) Loan Limits:

Maximum loan amount: 5 million dollars
No minimum loan requirement
Can be combined with other financing sources for larger projects

The actual amount you can borrow depends on several factors beyond these maximums:

Property value and appraisal: Lenders will not exceed a certain loan-to-value ratio
Cash flow and debt service coverage: Your business must generate sufficient income to support payments
Collateral position: The property itself serves as primary collateral
Credit profile: Both personal and business credit history affect approval amounts

For projects exceeding SBA limits, consider exploring our bridge loan programs as a supplemental financing option.

What Are the Current SBA Loan Rates for Commercial Real Estate?

Interest rates are a critical factor in your total cost of ownership. Here are the current rates as of January 2026.

SBA 504 Loan Rates (January 2026):

25-year term: 5.85% fixed
20-year term: 5.91% fixed
10-year term: 5.67% fixed

These rates are set monthly based on Treasury debenture pricing. The fixed nature means your rate is locked for the entire loan term - a significant advantage in uncertain economic conditions.

SBA 7(a) Loan Rates:

Base rate: Prime rate (currently 7.50%) plus a spread
Typical range: Prime plus 2.25% to Prime plus 2.75%
Current effective rates: Approximately 9.75% to 10.25%
Rate adjusts with prime rate changes

The rate difference between programs is substantial. On a 1 million dollar loan over 25 years, the difference between a 5.85% fixed rate and a 10% variable rate amounts to hundreds of thousands of dollars in interest payments.

How SBA Rates Compare to Conventional Financing:

Traditional commercial mortgages for owner-occupied properties currently range from 6.43% to 9.00% depending on property type and borrower qualifications. SBA 504 rates consistently beat conventional options, while 7(a) rates are competitive with but not necessarily better than conventional alternatives.

Use our commercial loan calculator to estimate your monthly payments under different scenarios.

What Are the Eligibility Requirements for an SBA Commercial Real Estate Loan?

Qualifying for an SBA loan for commercial real estate requires meeting specific criteria established by the Small Business Administration. Understanding these requirements upfront helps you prepare a stronger application.

Business Requirements

Your business must meet the SBA definition of a small business, which varies by industry based on either annual revenue or employee count. Generally, this means:

Fewer than 500 employees for most industries
Annual revenue under 7.5 million to 41.5 million dollars depending on your NAICS code
For-profit entity operating in the United States
Officially registered and legally operating

Owner-Occupancy Requirement

This is non-negotiable for SBA commercial real estate loans:

Existing buildings: Your business must occupy at least 51% of the space
New construction: Your business must occupy at least 60% of the space
Ground-up construction: You must occupy at least 60% initially, with plans to reach 80% within 10 years

Financial Requirements

Lenders evaluate your ability to repay the loan through several metrics:

Credit score: Minimum 680 personal credit score for most lenders (higher after June 2025 rule changes)
Debt service coverage ratio: Typically 1.25x or higher, meaning your net operating income must be at least 125% of your annual debt payments
Down payment: Minimum 10% for 504 loans, 10-20% for 7(a) loans
Business cash flow: Demonstrated ability to service the debt from operations

Additional Qualifications

No recent bankruptcies (typically within 3 years)
No outstanding tax liens or delinquent government debt
U.S. citizenship or permanent resident status for owners with 20% or more stake
Cannot be a passive investment - active business operation required

If you are new to commercial borrowing, our guide on how to get a commercial loan with no experience offers strategies for first-time borrowers.

What Down Payment Is Required for an SBA Commercial Property Loan?

One of the most attractive features of SBA loans is the low down payment requirement compared to conventional commercial mortgages.

Standard Down Payment Requirements

SBA 504 Loans:

Standard requirement: 10% of total project costs
Special use properties (hotels, restaurants, gas stations): 15% down
Startups or businesses under 2 years old: 15% down
Combination of special use AND startup: 20% down

SBA 7(a) Loans:

Real estate purchases: 10-15% down typically
Established businesses with strong cash flow: May qualify for as low as 0-5%
Startups or businesses under 2 years: 20-30% down
Business acquisitions over 500,000 dollars: Minimum 10%

What Counts Toward Your Down Payment

The SBA allows several sources for your equity injection:

Cash: The most straightforward option
Business assets: Equipment, inventory, or other tangible assets you contribute
Real estate equity: If you already own property being contributed to the project
Seller financing: The seller can carry up to 5% as a standby note with deferred payments

Strategies to Reduce Your Down Payment

Build strong cash flow documentation: Businesses with DSCR above 1.25x may negotiate lower equity requirements
Improve personal credit: Scores above 720 strengthen your negotiating position
Consider seller financing: Structured properly, seller notes can reduce your cash outlay
Explore CDC incentives: Some Certified Development Companies offer programs to assist with down payments

For a comprehensive look at down payment requirements across all commercial loan types, see our commercial loan down payment requirements guide.

How Long Does the SBA Loan Application Process Take?

Timeline expectations vary significantly between the two SBA programs. Planning accordingly helps ensure you can close on your desired property.

SBA 504 Loan Timeline: 60-90 Days

The multi-party structure of 504 loans adds complexity:

Pre-qualification (1-2 weeks): Initial review of financials and project scope
Application submission (1-2 weeks): Gathering all required documentation
Bank underwriting (2-3 weeks): The conventional lender reviews and approves their portion
CDC underwriting (2-3 weeks): The Certified Development Company reviews and packages for SBA
SBA approval (1-2 weeks): Final government review and authorization
Closing preparation (1-2 weeks): Document preparation and funding coordination

SBA 7(a) Loan Timeline: 30-60 Days

The simpler structure allows faster processing:

Pre-qualification (1 week): Initial lender assessment
Application and documentation (1-2 weeks): Submitting complete package
Underwriting (2-3 weeks): Lender review and decision
SBA authorization (3-5 days): Government approval for guaranteed portion
Closing (1 week): Final documents and funding

Factors That Speed Up Approval

Complete documentation submitted upfront
Strong personal and business credit
Clear, organized financial statements
Experienced SBA lender (preferred lender status)
Property with clean title and recent appraisal

Factors That Slow Down Approval

Incomplete application packages
Complex business structures or multiple entities
Environmental concerns requiring Phase I or Phase II assessments
Title issues on the property
Weak or inconsistent financial documentation

For details on what to expect during closing, review our commercial loan closing process timeline.

What Can You Use an SBA Commercial Real Estate Loan For?

SBA loans offer considerable flexibility in how funds can be used, though the specific allowable uses differ between programs.

SBA 504 Loan - Eligible Uses

The 504 program focuses on fixed asset acquisition:

Land purchase: Buying the lot for your business location
Building purchase: Acquiring an existing commercial structure
New construction: Building a new facility from the ground up
Building improvements: Renovations, expansions, or modernization
Leasehold improvements: Upgrading a leased space (with landlord agreement)
Site improvements: Parking lots, landscaping, utilities, grading
Heavy equipment: Machinery with a 10 year or longer useful life
Soft costs: Architect fees, permits, loan fees, and other project-related expenses

SBA 7(a) Loan - Eligible Uses

The 7(a) program allows broader applications:

All uses listed above for 504 loans, plus:
Working capital: Day-to-day operational expenses
Inventory purchases: Stocking your business
Business acquisition: Buying an existing business including its real estate
Debt refinancing: Consolidating existing business debt
Furniture and fixtures: Office buildout and equipment

What SBA Loans Cannot Fund

Both programs prohibit certain uses:

Speculative real estate investment
Properties where your business will not be the primary occupant
Passive income properties (pure investment)
Refinancing personal debt
Paying off delinquent taxes (until resolved)
Gambling facilities, pyramid schemes, or other ineligible businesses

If your project includes elements that SBA loans cannot cover, explore our DSCR loan programs as an alternative or supplemental option.

How Do You Apply for an SBA Loan for Commercial Real Estate?

The application process requires thorough preparation but follows a logical sequence. Here is your roadmap to a successful application.

Step 1: Gather Your Documentation

Before approaching lenders, compile these essential documents:

Business Documents:

Business tax returns (3 years)
Year-to-date profit and loss statement
Year-to-date balance sheet
Business debt schedule
Business plan (especially for newer businesses)
Articles of incorporation and operating agreements

Personal Documents:

Personal tax returns (3 years) for all owners with 20% or more stake
Personal financial statement
Resume highlighting relevant experience

Property Documents:

Purchase agreement or letter of intent
Property appraisal (lender may order this)
Environmental reports if available
Lease agreements for any rental income

Step 2: Choose Your Lender Wisely

Not all SBA lenders are created equal. Consider:

Preferred Lender Program (PLP) status: These lenders can approve loans without waiting for SBA review, significantly speeding the process
Experience with your property type: Lenders familiar with your industry understand the risks better
Local market knowledge: Regional lenders often provide more personalized service
CDC relationships: For 504 loans, ask about their Certified Development Company partnerships

Step 3: Submit Your Application

Work with your lender to complete all required forms:

SBA Form 1919 (Borrower Information Form)
SBA Form 413 (Personal Financial Statement)
SBA Form 912 (Statement of Personal History)
Lender-specific application forms

Step 4: Navigate Underwriting

During this phase, expect:

Detailed questions about your business operations
Requests for additional documentation
Property appraisal and environmental review
Verification of all financial information

Step 5: Close Your Loan

Once approved:

Review all loan documents carefully
Ensure you understand all terms and conditions
Schedule closing with all required parties
Fund your down payment and closing costs

Ready to start your application? Contact our SBA loan specialists for a personalized consultation on your commercial real estate project.

What Are the Advantages and Disadvantages of SBA Commercial Property Loans?

Every financing option involves trade-offs. Understanding both sides helps you make an informed decision.

Advantages of SBA Loans

Lower Down Payments: With 10% down compared to 20-30% for conventional commercial mortgages, SBA loans preserve your working capital for operations and growth.

Longer Repayment Terms: Twenty-five year terms mean lower monthly payments and improved cash flow compared to the 10-15 year terms typical of conventional commercial loans.

Competitive Interest Rates: SBA 504 rates currently beat most conventional options. The government guarantee reduces lender risk, translating to better terms for borrowers.

Fixed Rate Options: The 504 program locks your rate for the entire term, eliminating interest rate risk and making budgeting predictable.

No Balloon Payments: Unlike many conventional commercial mortgages, SBA loans fully amortize over their term. You will not face a large lump-sum payment at maturity.

Build Equity Instead of Paying Rent: Monthly payments build your ownership stake rather than enriching a landlord.

Disadvantages of SBA Loans

Owner-Occupancy Requirement: If you want to lease out more than 49% of the property, SBA loans will not work. Pure investment properties are not eligible.

Longer Approval Process: Especially for 504 loans, the 60-90 day timeline may not work for competitive purchase situations.

Personal Guarantee Required: Owners with 20% or more stake must personally guarantee the loan, putting personal assets at risk.

Prepayment Penalties: SBA 504 loans carry prepayment penalties for the first 10 years, typically declining from 5% in year one to 1% in year ten.

Collateral Requirements: The property serves as collateral, and 7(a) loans may require additional collateral pledges.

More Documentation: SBA applications require more paperwork than some conventional alternatives.

For a broader perspective on commercial lending options, explore our comparison of commercial versus residential lending.

How Do Recent SBA Rule Changes Affect Your Application?

The SBA implemented significant rule changes in June 2025 that affect how businesses qualify for loans. Understanding these changes helps you prepare accordingly.

Key Changes to SBA 7(a) Program (June 2025)

Higher Credit Score Requirements: The SBA raised minimum credit score thresholds, making it harder for borrowers with marginal credit to qualify. Most lenders now require a minimum 680 score, with many preferring 700 or higher.

Stricter Ownership and Citizenship Rules: New requirements tighten eligibility for owners without U.S. citizenship or permanent resident status. If any owner with 20% or more stake is not a citizen or permanent resident, additional documentation and review is required.

Return of Guarantee Fees: The SBA reinstated upfront guarantee fees that had been temporarily waived. For 504 loans, non-manufacturing projects now pay a 50 basis point fee.

Elimination of Merchant Cash Advance Refinancing: Businesses can no longer use SBA loans to refinance merchant cash advances, removing a previously available debt consolidation option.

What This Means for Borrowers

Start improving credit now: If your score is borderline, take steps to strengthen it before applying
Prepare for higher costs: Budget for guarantee fees in your closing cost estimates
Document everything: The stricter requirements mean more thorough documentation review
Consider timing: If you are close to qualifying, a few months of preparation could make the difference

Positive Developments for 2026

Not all changes are restrictive. Manufacturing businesses benefit from fee waivers through September 2026, and experts predict potential rate cuts later in 2026 as inflation moderates.

Is an SBA Loan Right for Your Commercial Real Estate Purchase?

After reviewing all the details, how do you decide if an SBA loan fits your needs? Consider these questions:

An SBA loan may be ideal if:

Your business will occupy at least 51% of the property
You want to minimize your down payment
You prefer predictable, fixed-rate payments (504 program)
You have strong personal credit (680 or higher)
You can wait 30-90 days for approval
You plan to hold the property long-term

Consider alternatives if:

You need faster funding for a competitive deal
Your credit score is below 680
You want to lease out more than 49% of the space
You plan to sell or refinance within 3-5 years
Your business does not meet SBA size standards

Your Next Steps

Assess your qualifications: Review the eligibility requirements and identify any gaps
Gather documentation: Start compiling financial statements and tax returns
Research properties: Know what you want before you apply
Compare lenders: Talk to multiple SBA-approved lenders
Get pre-qualified: Understand your borrowing capacity before making offers

Use our DSCR calculator to evaluate whether your business income supports SBA loan payments.

Ready to Explore Your SBA Loan Options?

An SBA loan for commercial real estate can transform your business by replacing rent payments with equity-building ownership. With down payments as low as 10%, fixed rates currently around 5.85%, and terms up to 25 years, these programs offer compelling advantages for qualifying businesses.

The key is working with experienced lenders who understand both SBA requirements and commercial real estate. At Clearhouse Lending, we specialize in helping business owners navigate the SBA loan process efficiently and successfully.

Whether you are ready to apply or still exploring your options, our team is here to help. Contact us today for a no-obligation consultation on your commercial property financing needs.

Sources:

U.S. Small Business Administration - 504 Loans (https://www.sba.gov/funding-programs/loans/504-loans)
U.S. Small Business Administration - 7(a) Loans (https://www.sba.gov/funding-programs/loans/7a-loans)
SBA 504 Current Rates - CDC Loans (https://cdcloans.com/sba-504-rates/)
SBA Loan Statistics - Bankrate (https://www.bankrate.com/loans/small-business/sba-loan-rates/)
SBA 504 vs 7(a) Comparison - Commercial Real Estate Loans (https://www.commercialrealestate.loans/blog/difference-between-sba-7a-and-sba-504-in-cre/)
SBA Loan Down Payment Requirements - LendingTree (https://www.lendingtree.com/business/sba/down-payment/)
January 2026 SBA 504 Interest Rates - SomerCor (https://somercor.com/january-2026-sba-504-interest-rates/)

SBA Loan for Commercial Real Estate: Complete 2026 Guide