What Are the Alternatives to the SBA 504 Loan?

SBA 504 Loan Alternatives: What You Need to Know

The SBA 504 loan is an incredible way to finance the purchase of owner-occupied commercial real estate, heavy equipment, and other fixed assets, but it isn’t right for everyone. While the interest rates are low, 504 loans usually require high credit scores and strong financials. Fortunately, the SBA 504 loan isn’t the only option out there when it comes to funding your business.

Common alternatives to SBA 504 loans include:

  • SBA 7(a) loan: SBA 7(a) loans are generally more flexible and somewhat easier to get approved for than SBA 504 Loans. Like 504 loans, 7(a) loans are offered in amounts of up to $5 million. While they do have significantly higher interest rates than 504 loans, 7(a) loans can be used for a wider variety of purposes, including working capital.

  • SBA 7(a) Express loan: SBA 7(a) express loans, also known simply as SBA express loans, are similar in nature to traditional 7(a) loans, but can get approved much, much faster. However, unlike regular 7(a) loans, these loans have a maximum loan amount of $350,000.

  • SBA CAPLines: These are fixed or revolving lines of credit that are guaranteed by the SBA. Offered in amounts of up to $5 million, CAPLines can have terms of up to 10 years (or 5 years for builders.)

  • Conventional loans: If you don’t qualify for SBA financing, there’s still a whole world of non-SBA loan options out there.

  • Patriot Express Loans: While the program expired in 2013, the Patriot Express loan was a variant of the SBA express loan that provided veterans and active duty service members up to $500,000 to finance their business.

  • SBA Microloans: SBA microloans are offered in amounts up to $50,000, and are significantly easier to obtain than larger SBA loans, like the SBA 7(a) and the SBA 504 loan.

These are just some of your options, but it should be understood that each loan program is unique. Some may be good solutions for your needs, but others might not fit well. You can find a full discussion and comparison of the various alternatives available from the SBA here.


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