SBA financing
SBA 7(a) vs 504
Both are SBA loans; they do different jobs. The 7(a) is the flexible, do-almost- anything loan from one lender. The 504 is the fixed-asset specialist: a low fixed rate for owner-occupied real estate and major equipment. Here's the side-by- side, and exactly which to reach for.
Last reviewed June 2026 · Written against SBA SOP 50 10 8
7(a) buys the business. 504 buys the building.
The side-by-side
| Best for | 7(a): buying a business, working capital, equipment, partner buyouts, refi — and real estate. · 504: owner-occupied real estate and major long-life equipment only. |
|---|---|
| Can fund goodwill / working capital? | 7(a): yes. · 504: no — fixed assets only. |
| Structure | 7(a): one loan, one lender, SBA-guaranteed. · 504: ~50% bank + ~40% SBA/CDC debenture + ~10% down. |
| Rate | 7(a): usually variable (WSJ Prime + spread), capped. · 504: fixed, below-market, for the life of the CDC debenture. |
| Max size | 7(a): up to $5M. · 504: CDC debenture up to $5M ($5.5M manufacturing/energy), plus the bank's ~50%. |
| Term | 7(a): ~10 yr (business), up to 25 yr (real estate). · 504: 10, 20, or 25 yr fixed. |
| Down payment | Both ~10%; 504 rises to ~15–20% for new/special-use projects. |
| Speed / simplicity | 7(a): faster, one closing. · 504: two loans + a CDC, more moving parts. |
Buying a business
If you're acquiring an operating business and much of the price is goodwill, it's a 7(a)— the 504 can't finance goodwill or working capital. If the deal includes the building the business occupies, a lender may split it: a 504 for the real estate, a 7(a) for the business itself.
Buying or building real estate
For owner-occupied commercial property you plan to hold, the 504 usually wins: a fixed, below-market rate on the SBA portion, ~10% down, and your working capital stays in the business. The full mechanics are on the SBA 504 loan page; the 7(a)'s rules are on the SBA 7(a) guide.
Common questions
What's the difference between an SBA 7(a) and a 504 loan?
The 7(a) is a flexible loan for almost any business purpose — buying a business, working capital, equipment, partner buyouts, even real estate — from a single lender. The 504 is a fixed-asset loan: long-term, fixed-rate money for owner-occupied real estate or major equipment only, structured as a bank loan plus an SBA-backed CDC debenture. In short: 7(a) buys the business, 504 buys the building.
Should I use a 7(a) or 504 to buy a business?
Buying an operating business — where much of the price is goodwill, not real estate — is almost always a 7(a). The 504 can't fund goodwill or working capital. If the acquisition includes the building the business occupies, a lender may split it: a 504 for the real estate and a 7(a) for the rest.
Which is cheaper, 7(a) or 504?
For long-term real estate or equipment, the 504 usually wins on rate: its CDC debenture is a fixed, below-market long-term rate, and you typically put down only ~10%. The 7(a) is more flexible and faster to one lender, but its rate is usually variable (prime plus a spread) and can run higher over a long hold.
What down payment does each require?
Both typically want about 10% down. On a 504 the borrower's share rises to ~15% for a new business or special-use property and ~20% if both. On a 7(a) business acquisition the SBA requires at least a 10% equity injection, up to half of which can come from a seller note on full standby.
Can I use both a 7(a) and a 504 together?
Yes. A common structure on a deal that includes real estate is a 504 for the owner-occupied property and a 7(a) for the business, goodwill, and working capital — two loans sized to what each program does best.
7(a)
Buy a business
504
Buy real estate
~10%
Down either way
$5M+
Either program's reach
AI summary
SBA 7(a) vs 504: the 7(a) is a flexible single-lender loan for almost any business purpose — buying a business (including goodwill), working capital, equipment, partner buyouts, and real estate — up to $5M, usually at a variable (Prime + spread) capped rate. The 504 funds only major fixed assets (owner-occupied real estate and heavy equipment), structured ~50% bank / ~40% SBA-backed CDC debenture / ~10% down, with a fixed below-market rate on the debenture and 10/20/25-year terms. Use 7(a) to buy a business or for working capital; use 504 for real estate or equipment at a low fixed rate; the two are often combined on a deal that includes property. General information, not legal, tax, or financial advice; CapBench is not a lender.
Source: CapBench, based on SBA program rules (SOP 50 10 8). CapBench is not a lender; verify current terms with a lender or CDC.
How this content is made
CapBench's guides and data pages are compiled from public records — SBA 7(a) FOIA loan data, FDIC filings, the eCFR (13 CFR Part 120), and the SBA SOP 50 10 — and checked against the current rulebook. Content is produced by CapBench's SBA-intelligence system with editorial review; every figure traces to a named public source, and pages show the date they reflect.
It is general information from the public record, notlegal, tax, financial, or investment advice — confirm specifics with a qualified professional or the SBA. See our methodology and data sources. CapBench is an independent information service and is not a lender or an SBA representative.
Official SBA resources
CapBench is an independent information service — not the SBA, and not affiliated with it. For official applications, definitive rules, and direct help, go straight to the source:
- SBA 7(a) loan program — The official program rules and terms (sba.gov).
- SBA Lender Match — The SBA's free tool to connect with participating lenders.
- Find your local SBA District Office — Free in-person counseling and guidance near you.
- SBA Answer Desk — The SBA's general help line for borrowers and the public.
SBA Answer Desk: 1-800-827-5722
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