504 vs 7(a) Comparison

 

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 SBA 504 LOAN
(Commercial Real Estate & Equipment)
90% Fixed Rate
SBA 7(A) LOAN
(General Purpose)
 LOAN SIZE
Minimum - $100,000
Maximum - $20 million +
Minimum - $50,000
Maximum - $5 million
INTEREST RATE
Fixed
 Mostly variable; some fixed options available
 TERM
20 years - real estate
10 years - equipment 
Up to 25 years - real estate
Up to 10 years - business acquisition and equipment
5 to 7 years - working capital
weighted average for mixed requests
DOWN PAYMENT
10% borrower *
Minimum 10% borrower (often more)
BUSINESS SIZE
Business net worth less that $15 million 
Determined by Industry type
 LOAN STRUCTURE
  50% bank loan
40% CDC/SBA loan
10% borrower down payment
 Structure negotiable - depending on risk
10% minimum down payment from borrower
USE OF PROCEEDS 
 Purchase of existing building
Land acquisition and ground-up construction
Expansion of existing building
Building Improvements
Purchase equipment   
Start, purchase or expand a business
Purchase or construct real estate
Refinance existing business debt
Buy equipment
Working capital
Leasehold Improvements
Purchase Inventory 
 PROGRAM  REQUIREMENTS 
51% owner occupied for existing businesses
60% owner occupied for new construction
Equipment: minimum 10-year economic life   
51% owner occupied for existing businesses
60% owner occupied for new construction
All assets financed must be used for the direct benefit of the business
 COLLATERAL
Generally, project assets being financed are sufficient collateral
Personal guarantees of principal owners of 20% or more ownership
Assets financed by loan proceeds
Generally, pledge of personal residence
Personal guarantees of principal owners of 20% or more ownership   
 FEES
Fees are financed in the 504 loan
Fees for the 50% bank loan
Servicing fee plus a legal review fee   
Fees can be financed in the 7a loan
Fees vary with the size of loan
Additional .25% charged on any loan portion above $1 million