SBA 504 often suits fixed-asset real estate projects, while SBA 7(a) may offer more flexibility for mixed-use business needs.
Choosing between an SBA 504 and an SBA 7(a) loan for real estate depends on the project, borrower goals, use of proceeds, rate structure, and need for flexibility.
SBA 504 is often attractive for owner-occupied commercial real estate and major fixed assets because it may use a 50% bank, 40% CDC/SBA, and 10% borrower equity structure. SBA 7(a) may be more flexible when the borrower also needs working capital, acquisition funding, or a simpler single-loan structure.
A lender can compare both structures side by side based on the property, cash flow, and borrower goals.
SBA loans may finance owner-occupied commercial real estate, often with up to 90% financing in eligible structures.
SBA real estate usually requires owner occupancy, often 51% for existing buildings and 60% initially for new construction.
SBA loans generally cannot be used for pure investment property, but mixed-use owner-occupied properties may qualify.
SBA loans usually cannot finance pure rental property, but owner-occupied mixed-use property may qualify under occupancy rules.
SBA loans may be used to buy land when the land is tied to an eligible owner-occupied business project.
SBA loans may be used for eligible owner-occupied commercial construction when plans, budget, and repayment support the project.
Have an SBA loan scenario to review? Market Direct Capital can help evaluate structure, eligibility, and next steps.
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