SBA 7(a) vs. 504: Which Loan Fits Your Deal

People mix these up constantly, and it's understandable — both are SBA programs, both carry a government guarantee, both offer better terms than most conventional loans. But SBA 7(a) and SBA 504 do very different jobs, and picking the wrong one can cost you flexibility, a better rate, or the deal itself.

Here's the plain-English breakdown. As always, FTI Capital is a broker and advisor — we don't lend the money; we figure out which program (and which lender) fits your deal and package it to close.

The 30-second version

SBA 7(a): the flexible workhorse

The 7(a) is the SBA's flagship program and the one we work with most. Its strength is flexibility — the proceeds can be used for almost any legitimate business purpose:

• Business acquisitions — buying an existing, profitable business.
• Partner buyouts — buying out a departing owner.
• Working capital — funding growth, hiring, or operations.
• Refinancing — replacing high-cost or balloon business debt.
• Real estate & equipment — including mixed-use deals a 504 can't cover.

• Loan size: up to $5 million.
• Rate: typically the Prime rate plus a lender spread, and it adjusts over time.
• Terms: commonly up to 10 years for most uses, and longer when secured by real estate.

If your deal is a mix of things — say, buying a business that comes with some equipment and needs working capital — the 7(a)'s flexibility is exactly why it wins.

SBA 504: long-term, fixed-rate money for fixed assets

The 504 program is purpose-built for one thing: financing major fixed assets — owner-occupied commercial real estate and heavy equipment with a long useful life. What makes it attractive is the structure and the rate.

• What it funds: owner-occupied CRE (buying, building, or renovating) and large, long-life equipment. Not working capital, inventory, or goodwill.
• Structure: usually a three-part split — a conventional lender covers roughly half, a Certified Development Company (CDC) backed by the SBA covers around 40%, and you contribute roughly 10%.
• Rate: the SBA portion is a long-term fixed rate — a real advantage when you're locking in a building for decades.
• Terms: long amortizations (commonly 10, 20, or 25 years depending on the asset).

The trade-off for that great fixed rate is rigidity: 504 money can only go toward those fixed assets, and the structure has more moving parts.

How to choose

Lean 7(a) if…

1. You're buying a business (with or without real estate attached).
2. You need working capital, or the deal is a mix of uses.
3. You're refinancing existing business debt.
4. You value flexibility and speed over locking a fixed rate.

Lean 504 if…

1. You're buying or building owner-occupied real estate for your business.
2. You're financing major, long-life equipment.
3. A long-term fixed rate matters more than flexibility.

Can you use both?

Sometimes, yes. A deal can be structured so a 504 handles the real estate while a 7(a) covers the business acquisition or working capital alongside it. That kind of stacking is exactly where an experienced broker earns their fee — matching the right combination of programs and lenders to your specific deal.