From cash-flowing rentals to new construction and commercial acquisitions, your deal is unique. Stop wasting time with banks that don't get it. We instantly match your project with the right partner from our network of 6000+ lenders.
Both programs offer excellent terms for owner-occupied commercial property. Learn which SBA loan is right for your situation.
Key Takeaways
Both SBA 504 and SBA 7(a) programs offer exceptional financing for owner-occupied commercial real estate, with low down payments and competitive rates. The right choice depends on whether you need working capital and your preference for rate structure.
$28.5B
in SBA 7(a) loans approved in fiscal year 2023
10-20%
typical down payment for SBA commercial real estate loans
25 years
maximum term for SBA 504 real estate loans
$5.5M
maximum SBA 504 loan amount for most projects
| Feature | SBA 504 | SBA 7(a) |
|---|---|---|
| Primary Use | Fixed assets: real estate and equipment | General purpose: real estate, equipment, working capital |
| Max Loan Amount | $5.5 million (CDC portion) | $5 million total |
| Down Payment | 10% typical | 10-20% typical |
| Interest Rate Type | Fixed (CDC portion), Variable (bank portion) | Variable or Fixed available |
| Rate Benchmark | CDC: Treasury + spread | Prime + spread |
| Term | 10 or 20 years (equipment); 25 years (real estate) | Up to 25 years for real estate |
| Loan Structure | Two loans: Bank (50%) + CDC (40%) | Single loan from one lender |
| Working Capital | No | Yes |
| Prepayment Penalty | Yes, declining over 10 years | Only if term is 15+ years |
The SBA 504 loan program is specifically designed for major fixed asset purchases, primarily commercial real estate and heavy equipment. It uses a unique structure involving three parties:
Bank First Mortgage
50%
Market rate, may be variable
CDC Second Mortgage
40%
Fixed rate, below market
Borrower Equity
10%
Down payment
The SBA 7(a) program is the most flexible SBA loan option. It's a single loan from one lender that can be used for virtually any business purpose, including real estate acquisition.
The 504 program is typically better when:
The 7(a) program is typically better when:
For a $2,000,000 commercial property purchase:
No, both SBA 504 and 7a loans require owner-occupancy. You must occupy at least 51% of the property for existing buildings or 60% for new construction. These are not available for pure investment properties.
SBA 504 loans typically have lower rates because the CDC portion (40% of the loan) is tied to Treasury rates. The blended rate of a 504 loan is usually 0.5-1% lower than a comparable 7a loan.
SBA 504 loans typically require 10% down, while SBA 7a loans may require 10-20% depending on the lender and project. Special-use properties may require higher down payments for both programs.
Our team works with over 1,800 SBA-approved lenders. We'll help you determine which program fits your needs and find the best terms.
Get SBA Pre-ApprovalFinancing solutions for every stage of the commercial property lifecycle
Financing for the purchase of new commercial assets
Rate, term, and cash-out solutions for existing commercial debt
Long-term, fixed-rate financing for stabilized commercial properties
Short-term funding for quick acquisitions or property stabilization
Securitized, large balance non-recourse commercial real estate mortgages
Government-backed financing for owner-occupied commercial real estate
Commercial financing
Ready to secure your next deal?
Fast approvals, competitive terms, and expert guidance for investors and businesses.