Tap to get financing
SBA 504 Loans
SBA 504 Loans
Loan usesRequirementsDown paymentsRates and costsCalculatorApplication processCompare SBA loansSBA 504 RefinancingApplication ChecklistClosing ChecklistLoan AssumptionFrequently Asked Questions
Requirements Application process Calculator Blog
About
About usContact us
Get financing
Close sba504.loans is an independently owned and operated website and has no government affiliation. We are not the Small Business Administration and are not a lender. If you are trying to reach the SBA click here to be redirected.
Newly Published
Aug 26 at SBA 504 Loans
What Is SBA Form 159?
Aug 26 at SBA 504 Loans
What Is the Small Business Administration?
Aug 26 at SBA 504 Loans
What Is SBA Form 770?
Explore the Janover Network
Mar 27 at Multifamily Loans
Multifamily Minute Reader Reflections: Interest Rate Outlooks
Mar 24 at Multifamily Loans
The Best 3 Multifamily Loans for Affordable Housing in 2023
Mar 20 at Multifamily Loans
Multifamily Minute Reader Reflections: How Will Bank Failures Impact Multifamily?
Was This Article Helpful?
SBA 504 Loan Guide
Last updated on Dec 19, 2022
2 min read

How Does the SBA 504 Loan Compare to a 7(a) Loan and Other Loans Available?

Making an informed decision for your business funding needs is essential, but it can be difficult given the number of different financial tools available. One of the most popular small business loans on the market is the SBA 7(a) loan . How does it compare to the 504 loan program ?

Better Financing Starts with More Options Start Your Application and Unlock the Power of Choice. Click Here to Get Quotes →$1.2M offered by a Bank at 6.0%$2M offered by an Agency at 5.6%$1M offered by a Credit Union at 5.1%Click Here to Get Quotes

SBA 504 Loans vs. SBA 7(a) Loans

Making an informed decision for your business funding needs is essential, but it can be difficult given the number of different financial tools available. One of the most popular small business loans on the market is the SBA 7(a) loan. How does it compare to the 504 loan program?

7(a) Loans:

You’ll find a number of similarities between 7(a) loans and 504 loans, but they are not the same. 7(a) loans:

  • Have a $5 million maximum

  • Requires 10 to 15% down

  • Interest tied to the prime rate

  • Are guaranteed to 85% for loans under $150,000, and 75% for those over $150,000, up to $3.75 maximum guarantee

  • Can be used for almost anything, including working capital and inventory

  • Are available in many formats. 5 and 10-year maturity rates are used for working capital and equipment, and 25 years for real estate.

  • Have no SBA fees if they are under $150,000 but incur graduated fees on amounts higher than $150,000

  • Standard business eligibility requirements

  • Have a prepayment penalty of up to 3 years

In contrast, 504 loans:

  • Permit loan sizes up to $5 million, or $5.5 million for small manufacturers

  • Requires 10% down except in specific instances (young startup and special-use real estate)

  • Interest set below market rate

  • Are guaranteed up to 90%

  • Have stringent use requirements, and are designed primary for the purchase of fixed assets, such as real estate or machinery

  • Have 10, 20 and 25 year terms

  • Lower fees than 7(a) loans for amounts over $150,000

  • More stringent business eligibility requirements

  • Have a prepayment penalty up to 10 years

Not sure if you are best served by a 504 loan or a 7(a) loan? You can download a comparison chart from the SBA here to get a better idea.

We’re here to help you get the commercial financing you need. Simply fill out the form below for a risk-free consultation and a free SBA loan quote!

Related Questions

What are the key differences between an SBA 504 loan and a 7(a) loan?

The key differences between an SBA 504 loan and a 7(a) loan are primarily in how they're used. The 7(a) allows you to use the funds from the loan for working capital, which you can't do with the 504. The 504 is larger, and has terms that are better suited to land and real estate projects that are large enough to be handled by multiple lenders. The 7(a) favors start-ups and small business owners looking to work with a bank, credit union, or other traditional lending institution. Eligibility requirements for the 7(a) are straightforward, and are designed to encourage lenders to approve small business owners for projects small and large. There is no minimum loan amount for the SBA 7(a), and the loan can be used for nearly any legitimate business purpose. Some of the terms of the SBA 7(a) are based on the amount of the loan, but banks generally ask for a 10% down payment from the borrower.

What are the advantages of an SBA 504 loan compared to other financing options?

The SBA 504 loan is a great option for businesses looking to finance the purchase of owner-occupied commercial real estate, heavy equipment, and other fixed assets. It offers low interest rates and long repayment terms of up to 20 years. Additionally, the SBA 504 loan program is designed to help small businesses grow and create jobs, so it is often easier to qualify for than other financing options.

The SBA 504 loan also offers a number of other advantages compared to other financing options, including:

  • No balloon payments
  • No personal guarantees
  • No prepayment penalties
  • No collateral requirements
  • No minimum credit score requirements

For more information on the SBA 504 loan and other financing options, you can check out this resource from the SBA.

What are the eligibility requirements for an SBA 504 loan?

In order to take out an SBA 504 loan, your business must meet the following eligibility requirements:

  • Your business must be a for-profit organization.
  • Your business must meet current SBA size standards.
  • Your business’ net worth cannot exceed $15 million.
  • Your business cannot earn 1/3 or more of its income from packaging SBA loans.
  • Your business must earn an average of $5 million or less per year (after taxes, and only for the preceding two years).
  • Your business cannot be engaged in any sort of passive or speculative activities.

Note that additional requirements may be placed by CDCs or conventional lenders. You can find a full list of eligibility requirements and other important information with the SBA here.

What are the maximum loan amounts for an SBA 504 loan?

The SBA 504 maximum loan amount is currently set at $5 million in lifetime dollars. However, if your business is a small manufacturer, you can borrow up to $5.5 million in lifetime dollars. It should also be noted that if you decide to embark on energy-related projects that fall under the “go green” heading, you can borrow substantially more. While all projects are capped at $5 million, you can ultimately borrow up to $16.5 million in lifetime dollars.

Source: https://sba504.loans/sba-504-blog/what-is-the-sba-504-maximum-loan-amount

What are the repayment terms for an SBA 504 loan?

The repayment terms for an SBA 504 loan are 10 to 20 years (fully amortizing). The interest rates vary, but the current maximum interest rates for the CDC portion of an SBA 504 loan are between 2.08 and 2.18% above the relevant U.S. Treasury Index (5-year index is used for 10-year loans, while the 10-year index is used for 20-year loans).

For more information, please visit www.commercialrealestate.loans/sba-504-loan and sba504.loans/loan-requirements.

Tags
  • SBA 504 Loan
  • SBA 504 Loans
  • SBA 504 Loan Uses
  • SBA 504 Loans for Online Businesses
  • SBA 504 vs. SBA 7a
  • 504 vs. 7a Loans
  • SBA Loan Comparison

Getting a small business loan should be easy.⁠ Now it is.

Click below for a free, no obligation quote and to learn more about your loan options.

Get financing →
Janover logo

SBA 504 Loans is a Janover company. Please visit some of our family of sites at: Multifamily Loans, Multifamily Today, Commercial Real Estate Loans, SBA7a Loans, CMBS Loans, Apartment Loans, HUD Loans, HUD 221d4 Loan, HUD 232 Loan, HUD 223f Loan, HUD 223a7 Loan, SBA Express Loans, SBA 504 Loans, and OpportunityZones Help.

Janover Inc.

6401 Congress Ave
Ste 250
Boca Raton FL 33487

[email protected]

Site Information

Privacy Policy
Terms of Use

This website is owned by a private company that offers business advice, information and other services related to multifamily, commercial real estate, and business financing. We are a technology company that uses software and experience to bring lenders and borrowers together.

All users should perform their own due diligence and research. Nothing on this website is an offer or a solicitation for a loan. This website does not endorse or charge you for any service or product. None of the information on this site constitutes legal advice. We are not affiliated with the Small Business Administration (SBA). If you need to visit the SBA directly please click here: sba.gov

Click here for our Advertiser Disclosure.

Copyright © 2023 Janover Inc. All rights reserved.