Key takeaways
- Both programs finance operating businesses that occupy the property. Rental investment property doesn't qualify.
- SBA 504 is built for real estate and long-term equipment. The maximum 504 loan is $5.5 million, with 10-, 20-, and 25-year terms.
- A common 504 structure is about 50% bank loan, 40% CDC loan, and 10% from the borrower, more for startups or special-purpose buildings.
- SBA 7(a) is more flexible, up to $5 million, and can combine real estate with working capital or equipment.
Who qualifies
Both programs require a for-profit business operating in the United States that meets SBA size standards and shows the ability to repay. SBA states that 504 funds can't be used for working capital, inventory, or "speculation or investment in rental real estate."
For real estate, SBA rules require the business to occupy most of the building: at least 51% of an existing building, and at least 60% of a newly constructed one (13 CFR 120.131). The rest can be leased to others.
How a 504 loan is structured
| Piece | Typical share | Lien position |
|---|---|---|
| Third-party lender (bank or credit union) | About 50% | First |
| Certified Development Company (CDC) loan, backed by SBA | Up to about 40% | Second |
| Borrower contribution | About 10%; 15% for a new business or special-purpose property; 20% if both | Equity |
SBA lists the maximum 504 loan at $5.5 million, with 10-, 20-, and 25-year maturities, and a rate pegged to an increment above the 10-year U.S. Treasury. Eligible uses include buying, building, or renovating buildings or land, and long-term machinery with at least 10 years of useful life.
How 7(a) compares
| SBA 504 | SBA 7(a) | |
|---|---|---|
| Maximum loan | $5.5 million | $5 million |
| Best for | Real estate and long-term equipment | Real estate plus working capital, equipment, or business acquisition |
| Working capital | No | Yes |
| Rate | CDC portion fixed, tied to 10-year Treasury | Set by lender within SBA limits; often variable |
| Down payment | About 10% typical | Varies by lender |
Many owners use 504 for a straightforward building purchase and 7(a) when the deal also includes buying the business or needs working capital. Lenders and CDCs can tell you which fits your file.
What to have ready
- Two to three years of business tax returns and current financial statements.
- A personal financial statement for each significant owner.
- The property details: price, size, the space your business will occupy, and any leases to other tenants.
- A project budget: purchase, closing costs, improvements, equipment, and soft costs.
Before you make an offer, get a lender's read on the loan amount and down payment. It changes what you can pay.
Common questions
Can I use an SBA loan to buy a building and lease part of it out?
Yes, within limits. The business must occupy at least 51% of an existing building or 60% of new construction. SBA 504 can't be used for speculation or investment in rental real estate.
How much down payment does an SBA 504 loan require?
Commonly about 10%. It's typically higher, around 15%, for a new business or special-purpose property, and around 20% when both apply. Confirm with your lender and CDC.
What is the maximum SBA 504 loan?
SBA lists the maximum 504 loan at $5.5 million.
Sources
- U.S. Small Business Administration, 504 loans
- U.S. Small Business Administration, 7(a) loans
- 13 CFR 120.131, Leasing part of new construction or existing building to another business
Sources retrieved October 2, 2026.
General information, not legal, tax, accounting, or investment advice. Program terms change. Confirm current SBA rules and your eligibility with an SBA lender or Certified Development Company. Examples marked illustrative use hypothetical numbers.