Skip to content

Whwat is the difference between the SBA 504 loan and the SBA 7a loan?

The following shows the SBA 504 and SBA 7a loans at a glance.

SBA 504 Overview

  • Used to finance or refinance commercial real estate and long-term fixed assets, including those invovled with a business acquisition
  • Offers up to $5.5 million and works in partnership with a primary lender
  • Interest rates are below-market fixed rates for the 504 portion of the loan
  • Generally requires collateral coverage at 95% fo the total project costs
    *additional collateral may be required
  • Is a direct loan to the business for up to 40% of the project, at a 10-, 20-, or 25-year term with a below-market, fixed interest rate with a 2nd lien position on collateral behind the primary lender

SBA 7a Overview

  • Used for any business need including real estate, equipment, working capital, revolving lines of credit, or a business purchase
  • Offers up to $5 million and is provided through a primary lender limited by their lending policies
  • Interest rates are variable and determined by the primary lender subject to SBA maximum rates
  • Requires the primary lender to maximize the collateral value as much possible to the loan amount
    *additional collateral may be required
  • Provides a guarantee to the primary lender to mitigate risk in the event of a default

Below is an example of a project for the purchase of land, construction of a building, purchase of equipment, refinance of equipment, and professional fees.

You can see the difference between amount financed, down payment requirements (in this case, assuming the primary lender will require 25% down), and monthly payment amounts and fees for the same project financed as an SBA 504 loan vs. SBA 7a loan.

Use our 504 calculator to run a scenario like this.

504 vs. 7a
SBA 504
Interest Rates

February 2020
10 Yr: 3.804%
20 Yr: 3.392%
25 Yr: 3.463%

calculator

504 Loan Calculator