SBA 7(a) vs SBA 504: Which Program Fits Your Use Case
Borrowers default to the SBA 7(a) because it is the program every banker pitches. The 504 program is cheaper, longer-term, and structurally better for owner-occupied real estate and heavy equipment — and almost no one explains the difference.
Use of proceeds
7(a) covers almost everything: working capital, debt refi, partner buyouts, real estate, equipment, business acquisition. 504 is narrower: owner-occupied CRE (51%+ occupancy), heavy equipment with 10+ year useful life, and limited soft costs.
Structure
7(a) is a single bank loan, SBA-guaranteed 75–85%. 504 is a three-part structure: 50% bank first mortgage + 40% SBA debenture (CDC) + 10% borrower equity.
Pricing
7(a) variable: Prime + 2.75–4.75%. 504 second lien is fixed for 25 years at debenture rate — typically 75–150 bps below 7(a) blended cost.
When 504 wins
Any owner-occupied real estate purchase over $500k. 10% down beats the 10–25% down required on conventional CRE financing, and the fixed long-term rate eliminates refi risk.
See real offers for term loan in 60 seconds.
We'll route your profile to lenders that actually fund this structure. No credit pull. No obligation.