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SBA 504 vs 7(a) Loan: Which Fits Your Business in 2026?
SBA 504 vs 7(a) in 2026: loan limits, uses, down payment, collateral, rates and terms compared from SBA's own rules, plus when each one fits better.
- 10%A 504 loan usually fits better for buying or building owner-occupied property or long-life equipment, because it gives long-term fixed-rate financing with a down payment that starts at 10%.
- $5 million7(a): $5 million for most 7(a) loans;
- $500,0007(a): $5 million for most 7(a) loans; SBA Express and Export Express loans max out at $500,000.
- $5.5 million504: SBA's 504 page states "The maximum loan amount for a 504 loan is $5.5 million.
A 504 loan usually fits better for buying or building owner-occupied property or long-life equipment, because it gives long-term fixed-rate financing with a down payment that starts at 10%. A 7(a) loan usually fits better for everything else, such as working capital, inventory, buying a business or a mix of uses, because it's more flexible and comes from a single lender.
Last checked: October 25, 2026. This page is general information, not tax, legal, or financial advice.
The quick comparison
Maximum loan
- 7(a): $5 million for most 7(a) loans; SBA Express and Export Express loans max out at $500,000.
- 504: SBA's 504 page states "The maximum loan amount for a 504 loan is $5.5 million." (The heading on the same page still says "up to $5 million", so confirm the current figure with your CDC.)
Uses
- 7(a): working capital, equipment, furniture and fixtures, real estate, refinancing certain business debt, and buying all or part of a business.
- 504: buildings and land, long-life machinery and equipment, and qualified debt refinancing. No working capital or inventory.
Down payment
- 7(a): set by the lender under SBA rules; there's no single SBA percentage.
- 504: at least 10% of the project cost, 15% for a business operating two years or less or for a limited- or single-purpose building, and 20% if both apply.
Collateral
- 7(a): SBA doesn't require collateral on loans of $50,000 or less. From $50,001 to $500,000 the lender follows its own collateral policy, but a loan isn't to be declined solely for inadequate collateral. Larger standard 7(a) loans are expected to be secured by the assets financed plus available fixed assets, up to the loan amount.
- 504: the private lender holds a senior lien and the CDC holds a junior lien on the project.
Rate type
- 7(a): fixed or variable, negotiated with the lender and capped by SBA maximums.
- 504: fixed, pegged to an increment above the 10-year U.S. Treasury rate.
Terms
- 7(a): generally 10 years or less, longer for real estate or long-life equipment, up to 25 years including extensions.
- 504: 10-, 20- and 25-year maturities.
How a 7(a) loan works
A 7(a) loan is made by a bank, credit union or other SBA-approved lender, and the SBA guarantees part of it. You apply through the lender, not the SBA.
| SBA guarantee | up to 85% on loans of $150,000 or less and up to 75% on larger loans. SBA Express loans carry a 50% guarantee, and SBA's maximum guarantee exposure is $3.75 million. |
|---|---|
| Interest | for variable-rate loans the cap ranges from the base rate plus 6.5% (loans of $50,000 or less) to the base rate plus 3.0% (loans over $350,000). |
| Prepayment | on loans with maturities of 15 years or more, prepaying 25% or more of the balance in the first three years triggers a fee of 5%, 3% or 1% of the prepaid amount in years one, two and three. |
| SBA Express | lenders can generally use their own processes for loans up to $500,000 in exchange for the lower guarantee. Revolving lines of credit are permitted only under SBA Express, Export Express and CAPLines. |
How a 504 loan works
A 504 loan provides long-term, fixed-rate financing for major fixed assets. It's offered only through Certified Development Companies (CDCs), which are nonprofit partners certified and regulated by the SBA, working with a private lender. A typical project is split three ways:
- A private lender loan with a senior lien covering up to 50% of the project cost.
- A CDC loan, backed by a 100% SBA-guaranteed debenture, with a junior lien covering up to 40% of the cost.
- A borrower contribution of at least 10% of the project cost (more in the cases above).
504 proceeds can pay for buying, building or renovating buildings or land, machinery and equipment with at least 10 years of remaining useful life, and refinancing debt that meets SBA's qualified-debt rules. They can't be used for working capital, inventory, non-qualifying debt, or speculation or investment in rental real estate. For the full contribution rules, see our guide: how much down payment an SBA 504 loan needs.
When a 7(a) loan usually fits better
- You need working capital, inventory or a line of credit.
- You're buying an existing business or a partner's share.
- Your needs mix several purposes, such as equipment plus working capital.
- The amount is relatively small and you'd rather work with one lender.
When a 504 loan usually fits better
- You're buying, building or renovating owner-occupied commercial property.
- You're buying heavy machinery or equipment with at least 10 years of useful life left.
- You want a long-term fixed rate on the fixed-asset portion of the project.
- You can put in the required contribution of 10% to 20% of the project cost.
Because the CDC portion is usually around 40% of the project, total project costs under a 504 can be well above the 504 loan amount itself.
Who qualifies
Eligibility basics for both programs
- An operating, for-profit business located in the U.S.
- Small under SBA size standards.
- Not be an ineligible business type.
- Not be able to get the desired credit on reasonable terms from non-federal, non-state and non-local government sources.
- Must be creditworthy with a reasonable ability to repay.
- Management expertise, a feasible business plan, good character.
- Size standards vary by industry, so check SBA's size standards tool rather than relying on one employee or revenue number.
Doesn't qualify
- It excludes nonprofit, passive and speculative businesses.
How to get it
How to get started
- For a 7(a) loan, start with a lender.
- SBA's Lender Match tool connects you with participating lenders, and your local SBA district office can help.
- For a 504 loan, contact a Certified Development Company; SBA keeps a list of CDCs by area.
- Ask each lender or CDC for current rates, fees, collateral and equity requirements in writing so you can compare offers on equal terms.
FAQ
Frequently asked questions
What is the maximum SBA 504 loan in 2026?
SBA's 504 page states a maximum of $5.5 million, though a heading on the same page says up to $5 million. Confirm the current limit with a CDC.
What is the maximum SBA 7(a) loan?
Most 7(a) loans max out at $5 million. SBA Express and Export Express loans max out at $500,000.
Can I use a 504 loan for working capital?
No. 504 proceeds can't be used for working capital, inventory, non-qualifying debt, or speculation or investment in rental real estate. A 7(a) loan can cover working capital.
How much is the down payment on a 504 loan?
At least 10% of the project cost. It's 15% if the business has operated two years or less or the project is a limited- or single-purpose building, and 20% if both apply.
Is the 504 or 7(a) rate fixed?
504 financing carries a fixed rate pegged to the 10-year Treasury. A 7(a) rate can be fixed or variable and is negotiated with the lender, subject to SBA maximums.
Programs that may match
Look beyond the loan
Important: FundPlenty isn't a tax, legal or financial advisor, and this page isn't tax, legal or financial advice. Program rules change, so confirm terms with your lender or CDC, or with a qualified professional, before relying on anything here.