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March 10, 2023

SBA 504 Loan or SBA 7(a) Loan: Which is Right for You?

Small business owners (and aspiring ones) are often attracted to SBA loans due to their lower interest rates and longer terms. However, it’s not always clear which SBA loan is the way to go: an SBA 504 loan or an SBA 7(a) loan?

At Fund-Ex Solutions Group, we specialize in SBA 7(a) lending — but want to give you the information you need to decide which SBA loan is right for you. While they share similarities, SBA 504 loans and SBA 7(a) loans are different in meaningful ways. Let’s take a closer look.

SBA 504 loans vs. SBA 7(a) loans

Here’s a quick comparison of the two.

SBA 504 loan

This is specifically for helping small businesses buy or improve an existing building or build something new. They can also be used to acquire other fixed assets that aren’t easily turned into cash flow (like equipment or vehicles). 

SBA 7(a) loan

The SBA 7(a) loan is a flexible loan for buying an existing small business, starting a new one, or expanding. Small business owners can use it to purchase equipment, real estate, supply costs, or other eligible business expenses. It can also be used for refinancing.


To be eligible for an SBA 504 loan, a business must:

  • Meet the SBA’s definition of a small business
  • Be for-profit
  • Be located in the United States
  • Demonstrate a need for the funds
  • Achieve certain job creation or public policy goal
  • Use the loan to purchase, refinance, or improve eligible fixed assets that will be used in its operations

For an SBA 7(a) loan, the requirements are a little more relaxed. The business must:

Repayment terms

The terms for an SBA 504 loan are up to 25 years for land and real estate, depending on the remaining useful life of the property.1

Repayment terms for an SBA 7(a) loan depend on the purpose of the loan and the ability of the borrower to repay it. Terms can range from 7 to 25 years.1

Interest rates

Rates for SBA 504 loans are fixed and are usually based on the market rate for 5-year and 10-year U.S. Treasury issues.

Rates for SBA 7(a) loans are determined by the lender, with the SBA putting a cap on the maximum rate that can be charged.


Collateral is always required for an SBA 504 loan. The amount of collateral is dependent on the loan amount and the borrower’s creditworthiness.

The SBA requires SBA 7(a) lenders to take all available collateral but depending on the lender and the use of proceeds, small business owners may be able to borrow money based on the projected future cash flows.

We can help with an SBA 7(a) loan

Choosing between an SBA 504 loan and an SBA 7(a) loan depends on a small business owner’s specific needs and goals. SBA 504 loans are designed for buying or improving real estate, while SBA 7(a) loans are more flexible and can be used for a wider range of purposes — like buying, starting, or expanding a business, purchasing equipment, or refinancing.

If you’re a small business owner, carefully consider both options and choose the loan that best suits your needs. If you decide an SBA 7(a) loan is right for you, feel free to reach out to us. We’re here to help.


1 Terms subject to credit approval upon completion of an application. Loan sizes, interest rates, and loan terms vary based on the applicant’s credit profile. Finance amount may vary depending on the applicant’s state of residence. Call 866-297-4311 for complete program details.