SBA 504 Loan

SBA 7(a) and 504 Loans: Which Is Right For You?

As a small business owner, you wear many hats—including managing employees, operations and more. But what happens when you’re ready to grow and you need capital to get there?

This is what a small business loan is for.

The United States government has a few options available for small-to-medium business owners, and two of the most accessible options are the Small Business Administration (SBA) 7(a) and the SBA 504.

While the two have similarities, they have a few key differences, and depending on your goals, they can help you in different ways.

Continue reading about these loans so you can choose the best option for your business.

What is the 7(a) Loan Program?

If investing in real estate is part of your growth strategy, the 7(a) Loan program is likely your best bet. It can also be used for:

  • Long-term and Short-term working capital
  • Refinancing current commercial debt
  • Investing in furniture, fixtures, and supplies

The SBA is not a lender. A third party partly guarantees SBA business loans, such as a financial institution or private SBA lending institution. This lowers a lender’s risk of providing financing to entrepreneurs and incentivizes lenders to approve candidates who would otherwise be denied. A bank or another type of direct lender will underwrite and approve your SBA 7(a) loan. They will also require a 10% to 20% down payment.

SBA 7(a) loans have a peak maturity period of 25 years for real estate and ten years for equipment and working capital loans, with loan terms ranging from $5,000 to $5 million depending on needs. The turnaround time for the application process is quite speedy.

Various sub-programs, such as Community Advantage Loans for women, minorities, and others, may be available for your business.

What is the SBA 504 Loan?

Under the Certified Development Companies (CDC)/504 program, loans provide long-term, fixed-rate financing of up to $5 million for business assets that promote job creation and growth.

CDCs are accredited and regulated by the SBA. As community-based partners, they regulate nonprofits and are involved in economic development.

Your business must meet the following requirements to qualify for a 504 loan:

  • Operate a for-profit business in the United States or its possessions
  • Have an actual net worth of less than $15 million
  • After federal income taxes for the two years preceding your application, have an average net income of less than $5 million
  • Additionally, an applicant must fall within SBA size guidelines, possess qualified management experience, have a workable business plan, and be able to repay the loan.

Speculative, passive, or nonprofit businesses are ineligible for loans. If you need more information on eligibility criteria or application requirements, don’t hesitate to contact a Certified Development Company in your area.

If you are considering a small business loan, several options are available to you. A 7(a) loan is an excellent option for businesses seeking working capital and fits various needs. The SBA 504 loan is designed more for real estate investments and other fixed assets. For small business owners searching for affordable financing, both 504 and 7(a) loans are excellent options.


Lendistry is a Black owned fintech firm that offers SBA 504 loans and has a customizable online portal that enables small and medium business owners to obtain capital more efficiently and quickly. Lendistry also offers SBA 7(a) loans through its wholly-owned subsidiary, Lendistry SBLC. To learn more, reach out to them anytime.

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