Clear House Lending connects real estate investors and developers with the right lender from our network of 6,000+ private capital sources. Bridge, DSCR, SBA, hard money, and construction loans -- most borrowers get term sheets within 48 hours.
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.
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