Head to head
SBA 7(a) loan vs SBA 504 loan
Both are SBA programmes and both fund real estate, which is why they get confused. The practical split is whether the deal has any non-property component, and whether a fixed rate for twenty-five years matters more than closing quickly.
| SBA 7(a) loan | SBA 504 loan | |
|---|---|---|
| Typical amount | Up to $5 million | Typically up to $5.5 million in the SBA portion |
| Cost | Prime + 3% to prime + 6.5%, by loan size | Fixed, pegged to a bond sold at funding |
| Time to funding | 30-90 days | 60-120 days |
| Term | Up to 10 years, 25 with real estate | 10, 20, or 25 years |
| Relative expense | $ | $ |
Cost bands are editorial judgements expressed in APR-equivalent terms so products quoting factor rates and discount fees can be compared with products quoting interest. They indicate relative expense, not quotes. Methodology.
SBA 7(a) loan
Usually chosen when
- The deal mixes property with working capital, goodwill, or equipment, which a 504 cannot fund in one loan
- You are buying a business rather than a building
- Speed matters and you would rather not coordinate a bank, a CDC, and a debenture sale
- The amount sits comfortably under the $5 million cap
SBA 504 loan
Usually chosen when
- The project is owner-occupied property or long-life equipment and nothing else
- A genuinely fixed rate for 20 to 25 years is worth waiting for
- Preserving capital matters: the borrower typically injects 10% against a larger 7(a) equity requirement on some deals
- The total project is large enough that the rate difference outweighs the extra complexity
Common questions
- Can I use a 504 loan for working capital?
- Generally no. The 504 programme funds owner-occupied real estate and long-life equipment, with a narrow refinance exception. Working capital, inventory, and goodwill fall outside it, which is why mixed deals usually end up as a single 7(a).
- Which is cheaper?
- For a pure owner-occupied property deal, 504 usually wins on rate and on rate certainty. For anything with a working capital or goodwill component, one 7(a) is often cheaper in total than a 504 plus a separate facility.
Other comparisons
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