# SBA 7(a) vs. 504: Which Fits Your Business The two main SBA programs solve different problems. Choosing the wrong one costs time; choosing the right one can mean a lower down payment, a longer term, or a loan that would not exist without the guarantee. This guide compares them on the points that decide the choice. ### What Each Program Is For **7(a)** is the general-purpose program. It can fund working capital, equipment, inventory, a business acquisition, debt refinancing, and real estate, up to $5 million. One lender makes the whole loan and the SBA guarantees a portion of it. **504** is for fixed assets with a long life: owner-occupied commercial real estate and heavy equipment. It is structured as two loans, a bank first mortgage for about half of the project and a Certified Development Company (CDC) second mortgage, backed by the SBA, for up to 40%. The borrower contributes the rest, commonly 10%. ### Side by Side Question | 7(a) | 504 | Best for | Working capital, acquisitions, mixed needs, real estate under $5M | Buying or building the property your business occupies; large equipment | Maximum | $5 million | CDC portion up to $5 million ($5.5 million for manufacturing and some energy projects); the bank portion has no SBA cap | Typical equity | About 10% for most purposes; more for some acquisitions | 10% in most cases, 15% for a start-up or special-purpose property, 20% for both | Rate | Usually variable, tied to a base rate plus a capped spread | CDC portion fixed for the life of the loan; bank portion set by the bank | Term | Up to 10 years for most uses, up to 25 for real estate | 10, 20 or 25 years on the CDC portion | Occupancy | Real estate must be at least 51% owner-occupied | At least 51% for existing buildings, 60% for new construction | Fees | SBA guarantee fee on the guaranteed portion, plus lender closing costs | CDC and SBA fees financed into the second loan; bank fees on the first | Figures change with SBA policy and lender practice. Treat this table as the shape of the decision, and confirm the current numbers with the lender. ### When 7(a) Is the Better Fit - You need money for more than one purpose in a single loan, for example buying a building and adding working capital. - You are buying a business, with or without its real estate. - Speed matters and the loan is small enough for a lender’s expedited process. - You want one lender and one closing. ### When 504 Is the Better Fit - The purpose is real estate or long-lived equipment and you plan to hold it. - You want a fixed rate on a large part of the loan for 20 or 25 years. - The project is larger than $5 million, because the bank’s first mortgage is not capped by the SBA. - You can wait for two closings and are comfortable with a second lien. ### What Both Require An operating for-profit business in the United States that meets the SBA’s size standards, owners with reasonable credit and no recent government loan defaults, a personal guarantee from anyone owning 20% or more, and a demonstrated ability to repay from the business’s cash flow. Neither program lends to passive real estate investors. ### Finding the Right Lender SBA lenders differ far more than the programs do. Some are Preferred Lenders who approve in-house; others send every file to the SBA. Some specialize in one industry; some avoid it. On LenderMatrix, lenders list which SBA programs they offer, the industries they serve and the states they lend in, so you can search for a 7(a) or 504 lender that already fits before you send a request. --- Source: https://lendermatrix.com/sba-7a-vs-504/ LenderMatrix is a marketplace, not a lender. Program information is supplied by lenders and can change. A potential match is not an approval or an offer of credit.