SBA 504 vs. 7(a): Which Loan Fits Your Project?
When business owners say "SBA loan," they usually mean one of two programs — and picking the wrong one can cost you points, time, and flexibility. Both are government-guaranteed loans made by approved lenders, but they are built for different jobs.
The 504: built for real estate and big equipment
The SBA 504 is a three-part structure: a bank covers 50% of the project, the SBA (through a CDC) covers 40%, and you put down 10%. That structure is why the rate is so hard to beat — the SBA portion is a long-term debenture priced off Treasuries.
- October 2026 prevailing rates (SBA portion, fixed for the full term): 6.97% for 25 years, 6.97% for 20 years, 6.60% for 10 years.
- Best for: buying or building the property your business occupies, and heavy equipment with a 10+ year life.
- Limits: the SBA portion caps at $5M ($5.5M for some projects); the property must be at least 51% owner-occupied.
The 7(a): built for almost everything else
The 7(a) is the SBA's flagship — one loan, up to $5M, that can cover real estate, business acquisitions, partner buyouts, equipment, working capital, and even refinancing, all in a single package.
- Rates: usually variable. SBA caps them at Prime + 3.00% on loans over $350,000 — with WSJ Prime at 7.00%, that ceiling is currently 10.00%, and well-qualified borrowers price below the cap.
- Terms: up to 25 years for real estate, 10 years for most other uses.
- Down payment: often 10–20%, and seller financing can sometimes count toward it on acquisitions.
So which one?
Choose the 504 when the deal is mostly real estate or equipment, you want a fixed rate locked for decades, and you can bring 10% down. Choose the 7(a) when the deal mixes real estate with goodwill, working capital, or an acquisition — or when speed and simplicity matter more than the last half-point of rate. Many owners run both across their growth: a 504 for the building, a 7(a) line for the business inside it.
The honest answer depends on your project's mix, your cash position, and your timeline. That's the conversation we have every day — bring us the project and we'll show you both structures side by side, with real numbers.
NEWLOANCO Commercial is a division of NEWLOANCO (NMLS #1369124). Jorge R. Regalado, CEO — NMLS #1243458. Content is educational only and is not a loan offer, quote, or commitment to lend. All loans are subject to lender approval. SBA loans are made by SBA-approved lenders; NEWLOANCO is not affiliated with the U.S. Small Business Administration or any government agency.