The 7(a) is the SBA’s all-purpose loan. The 504 is a specialist: it exists to help businesses buy real estate and major equipment. If you are buying a building, compare both. For almost anything else, the 7(a) is the answer.
Side by side
| SBA 7(a) | SBA 504 | |
|---|---|---|
| Maximum | $5 million | $5 million SBA portion ($5.5 million for some manufacturers and energy projects) |
| Uses | Working capital, inventory, equipment, buying a business, real estate, refinancing | Land, buildings, construction, renovations, long-life equipment |
| Who lends | One lender (bank, credit union, nonbank) | A bank plus a Certified Development Company (CDC) |
| Typical down payment | Depends on the deal; 10% minimum when buying a business | Often 10%; more for startups or special-purpose buildings |
| Rate | Fixed or variable, capped by SBA rules | Fixed long-term rate on the CDC portion |
| Terms | Up to 10 years (working capital, equipment), up to 25 years (real estate) | Long fixed terms on the CDC portion; the bank sets its own |
How a 504 is structured
A typical 504 project splits the cost three ways:
- About 50% from a bank, in a first mortgage.
- About 40% from a CDC, backed by the SBA, in a second mortgage with a fixed rate.
- About 10% from you.
Startups and special-purpose properties (a hotel, a gas station) often need to put in more. Learn more in What Is a CDC.
When the 7(a) wins
- You need working capital or inventory. The 504 cannot fund these.
- You are buying an existing business, including goodwill.
- You want one loan for several things, like equipment plus a renovation plus some cash.
- You want to refinance expensive business debt.
- You need a smaller amount quickly. Look at SBA Express for up to $500,000.
When the 504 wins
- You are buying or building a property your business will occupy (generally at least 51% for an existing building).
- You want a long fixed rate to protect against rising rates.
- You want to keep more cash in the business with a smaller down payment on a large project.
- You are buying heavy equipment with a long useful life.
A simple rule
Ask one question: Is this mostly about real estate or big equipment? If yes, ask lenders to quote both a 7(a) and a 504. If no, focus on the 7(a).
Both programs follow the SBA’s current ownership rule: since March 2026, all owners must be U.S. citizens or nationals.
Find the right lender
Some banks make mostly 7(a) loans; some partner with CDCs on 504 projects. Our lender finder lets you filter by program and state, so you can see who has actually funded each type near you. Then estimate your payment for each option.
Frequently asked questions
Can I use a 504 loan for working capital?
No. The 504 is for real estate and long-life equipment. Working capital, inventory and most business purchases need a 7(a) loan.
How much down payment does a 504 loan need?
Typically about 10% of the project. Startups and special-purpose properties like hotels or gas stations often need 15–20%.
Which has a fixed rate, 7(a) or 504?
The CDC portion of a 504 has a long-term fixed rate. A 7(a) can be fixed or variable, with rate caps set by the SBA.
Take the next step
Find out in 2 minutes whether you might qualify and which lenders are active in your state.
Do I qualify? Find lenders Calculator
Educational information, not legal or financial advice. We are not a lender and are not affiliated with the SBA. Disclaimer