SBA 7(a) vs 504: Which One Fits Your Deal?
The SBA has two main loan programs, and choosing the wrong one can cost you time or force you to restart. The short version: 504 is for buildings and big equipment; 7(a) is for almost everything else, including buying a business.
Side-by-Side Comparison
- Maximum amount: 7(a) up to $5M · 504 SBA portion up to $5.5M (total project can be larger)
- Uses: 7(a) — working capital, acquisitions, equipment, real estate, refinancing · 504 — real estate, construction, long-life equipment only
- Down payment: 7(a) commonly 10%+ (varies by use) · 504 usually 10%, 15–20% for start-ups or special-purpose property
- Rates: 7(a) typically variable, priced off Prime with SBA caps · 504 fixed on the CDC portion
- Terms: 7(a) up to 10 years (working capital/equipment) or 25 years (real estate) · 504 10, 20, or 25 years
- Lenders: 7(a) — one SBA lender · 504 — a bank plus a Certified Development Company
Choose 7(a) If…
- You're buying an existing business (including goodwill)
- You need working capital or inventory
- Your deal mixes uses — say, a building plus equipment plus working capital
- You want to refinance higher-cost business debt
Choose 504 If…
- You're buying or building a property your business will occupy (51%+)
- You want a long-term fixed rate on the largest piece of a real estate loan
- You're financing major equipment with a long useful life
A Quick Example
A Fresno distributor wants a $3M warehouse. With a 504, they'd likely bring about $300K and get a fixed rate on roughly 40% of the loan. With a 7(a), they'd bring a similar or larger down payment but could also roll in moving costs and working capital. If the warehouse is the whole deal, 504 usually wins; if it's one piece of a bigger plan, 7(a) can be simpler.
Estimating an acquisition? Try the calculator on our business acquisition loans page. Read more in SBA 504 Loans Explained.
Figures reflect general SBA program guidelines and typical market practice. Requirements, rates, and timelines vary by lender and deal, and every loan is subject to underwriting and approval.
Related SBA guides: SBA 504 Loans Explained · SBA 7(a) vs 504 · SBA Working Capital Loans · SBA Loan Timeline · SBA Loan Denied?
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