SBA Lending: Why It’s Misunderstood and How to Use It to Your Advantage

[Matt Antonucci]

SBA lending has gotten a bad reputation over the past decade.

Ask around, and you’ll hear the usual complaints: “Too slow.” “Too much paperwork.” “Too many restrictions.”

The reality? It’s an incredible tool when used correctly—especially for commercial real estate.

Yes, SBA loans require structure. Yes, they have rules. But the right lender can help you unlock financing that traditional banks simply won’t touch—often with better terms, lower down payments, and more flexibility than conventional options.

SBA Loans for Real Estate: 7(a) vs. 504—Which One is Right?

If you're looking at commercial real estate and considering SBA financing, you need to know the difference between the 7(a) and 504 programs.

SBA 7(a) Loan – The Versatile Option

✔ Max Loan Size: $5 million
✔ Down Payment: As low as 10% (varies by lender and deal structure)
✔ Eligible Use: Real estate, working capital, equipment, partner buyouts, business acquisitions
✔ Term Length: Up to 25 years for real estate (10 years for other uses)
✔ Interest Rate: Variable or fixed, typically Prime + 2.75% (capped by SBA)
✔ Key Advantage: Flexibility. You can finance both real estate and business-related expenses under one loan.

SBA 504 Loan – The Fixed-Rate Power Play

✔ Max Loan Size: Typically $5M, but can go higher with green-energy incentives
✔ Down Payment: Typically 10% (15%–20% for special-purpose properties)
✔ Eligible Use: ONLY for real estate and equipment—no working capital
✔ Term Length: 20 or 25 years (real estate), 10 years (equipment)
✔ Interest Rate: Fixed, below-market rates (CDC portion is government-backed)
✔ Structure:

• 50% Bank Loan
• 40% SBA/CDC Loan
• 10% Borrower Equity (15%-20% for special-use properties)

Which One Should You Use?

🔹 Need working capital with your real estate? → 7(a)
🔹 Want a lower fixed rate with minimal equity? → 504
🔹 Buying a special-use property (hotel, gas station, etc.)? → Likely 504 with higher equity
🔹 Acquiring a business along with the property? → 7(a)

Key Takeaway: Both SBA programs can be powerful financing tools—but the trick is structuring the deal correctly from the start. The right lender will help you determine eligibility, guide you through underwriting, and ensure you're maximizing SBA benefits.

Are you currently considering SBA for a deal? Drop a comment—let’s talk through the options.