The chart below includes information about the SBA 504 and 7(a) loan programs. The SBA offers several different types of loans for small businesses, and there may be one that makes more sense for your business than another. Picking the right loan program will save you money in the long run!
| SBA 504 | SBA 7(a) | Notes: | |
| Funding Limits | SBA 504 portion of project up to $5 Million, Manufacturers up to $5.5 Million per project, Energy Saving Projects up to $5.5 Million per project | Loans up to $5 Million, Total SBA exposure not to exceed $5 Million | 504 Program allows manufacturers to use the program as often as necessary, as long as the 504 portion is $5.5 Million or less in each project |
| Eligible Use of Funds | Land, buildings, equipment, leasehold improvements and project related soft costs including appraisals, surveys, interim interest, and professional fees. 504 Refinance w/ Expansion where refi amount is 100% or less of new funds. 504 Refinance w/o Expansion where existing debt may be refinanced without new funds (subject to restrictions). | Land, buildings, M&E, F&F, valuation supported "goodwill", inventory, leasehold improvements, term working capital, eligible soft costs, and debt refinance w/ 10% cash flow improvement. Combination / "Piggyback" financing not eligible. | 504 program is for fixed assets (owner occupied real estate and equipment) 7(a) Program is a bit more flexible. Not uncommon to use both programs together, especially in the case of a business acquisition or start-up |
| Interest Rate | About 2.6% over the 10 year treasury rate | Depending on size and term, typically floating rates at the Prime rate plus a spread of up to 2.75% | 504 interest rate (effective rate including fees) is almost always considerably lower |
| Collateral | Pledge of 504 project assets; pledge of personal collateral and/or life insurance determined on a case by case basis | 1st lien on financed assets; Personal Real Estate must be pledged if there is a shortfall and if equity is > 25%; Life Insurance required in some cases | 504 program has more flexible and customer friendly collateral requirements |
| Fees | All rates quoted by WBD (including on this site) are Effective Rates after rolling in all fees! | No fees for loans $1,000,000 or less. Graduated Tier Fee Structure for loans from $1,000,001 on up. | Both Programs have fees, but as the project size grows the 504 has a greater advantage in lower fees. For most projects over $1,000,000 the 504 will save the business a considerable amount of fees. |
