The Major Differences Between SBA 504 Loans and SBA 7a Loans

Small businesses looking for financing options have a variety of loan programs available to them. Two of the most popular loans offered by the Small Business Administration (SBA) are 504 and 7a loans. While these two loans share some similarities, they also differ in important ways that business owners should understand before deciding which type is best for their needs.

SBA 504 Loans

SBA 504 loans are designed to help businesses purchase fixed assets, such as real estate or construction projects. These loans can be used for up to $5 million in financing and typically offer better terms than traditional bank loans. The loan is structured with a 50/40/10 split between the borrower, the lender, and the SBA. This means that 50% of the loan comes from a traditional lender, 40% from the borrower, and 10% is guaranteed by the SBA. This unique structure allows borrowers to get better loan terms, such as lower interest rates and longer repayment periods.

SBA 7a Loans

On the other hand, SBA 7a loans are more flexible than 504 loans and can be used for a variety of purposes including working capital, debt refinancing, and equipment purchases. These loans can also be used for up to $5 million and feature longer repayment terms than traditional bank loans. However, unlike 504 loans, there are no set funding splits with SBA 7a loans; the loan amount is based solely on the borrower’s creditworthiness.

In conclusion, both SBA 504 and SBA 7a loans are excellent financing options for small businesses. Each loan type has its unique advantages and disadvantages, so it’s important to understand the differences between them before making a decision. By taking the time to compare your options, you can find the right loan for your needs and get off to a strong start with financing your business.

Seek Expert Assistance

Need financing for your up-and-coming business? We invite you to review the many small business loan selections we offer here at Forsyth Capital Group. These loans have very reasonable qualification requirements because they’re designed to help small businesses get on the fast track to success. Come talk to us when you’re ready for funding and we’ll help you choose the right SBA loan program for your needs.