SBA 504 vs SBA 7(a) & Conventional
When compared to SBA 7(a) or conventional financing, SBA 504 financing offers some significant advantages. The chart below outlines some of the differences.SBA 504
Down Payment
Maximum Project Size
Interest Rates
Fees
Collateral
Prepayment Penalty
SBA 504
10% minimum
No maximum
Below-market, FIXED for full term (20 years)
Financed, included in SBA loan; approximately 2.15%
No additional collateral required
Yes, for first 10 years, declining each year
SBA 7(a)
10-15% minimum
$5 million maximum
Typically variable
Paid out-of-pocket; 2-3.75%
Additional collateral typically required for 90% financing
Yes, for first three years
CONVENTIONAL
25-40%
No maximum
Varies by lender
Paid out-of-pocket; approximately 1%
Typically no additional collateral required
Varies by lender
| Down Payment | |
|---|---|
| SBA 504 | 10% minimum |
| SBA 7(a) | 10-15% minimum |
| CONVENTIONAL | 25-40% |
| Maximum Project Size | |
| SBA 504 | No maximum |
| SBA 7(a) | $5 million maximum |
| CONVENTIONAL | No maximum |
| Interest Rates | |
| SBA 504 | Below-market, FIXED for full term (20 years) |
| SBA 7(a) | Typically variable |
| CONVENTIONAL | Varies by lender |
| Fees | |
| SBA 504 | Financed, included in SBA loan; approximately 2.15% |
| SBA 7(a) | Paid out-of-pocket; 2-3.75% |
| CONVENTIONAL | Paid out-of-pocket; approximately 1% |
| Collateral | |
| SBA 504 | No additional collateral required |
| SBA 7(a) | Additional collateral typically required for 90% financing |
| CONVENTIONAL | Typically no additional collateral required |
| Prepayment Penalty | |
| SBA 504 | Yes, for first 10 years, declining each year |
| SBA 7(a) | Yes, for first three years |
| CONVENTIONAL | Varies by lender |
Go Green to qualify for additional SBA financing
The SBA’s energy efficiency program is designed to incentivize businesses to reduce energy consumption or generate renewable energy. Under this program, business owners can exceed the traditional SBA 504 project limits. A business may borrow up to $16.5 million in SBA funds, with a $5.5 million per project maximum. There is no maximum total project size, and no limit to the number of projects allowed to each borrower, which means that business owners looking for additional financing may now be eligible even if they have met SBA’s usual lending limits of $5 million per borrower. Business owners who had previously reached their SBA maximum may now qualify for additional SBA loans.
To qualify, you must either:
Reduce your business’ energy consumption by 10% or more
- Installing energy-efficient lighting
- Using hybrid or alternative fuel vehicles
- Installing a more efficient HVAC system and/or more energy-efficient appliances
- Improving insulation (new windows & skylights)
Generate renewable energy or renewable fuels to generate 10% or more of energy usage
- Installing solar panels
- Installing wind turbines
Does Your Project Meet These Program Guidelines?
To see if your project may meet these program guidelines and learn more about taking advantage of this additional 504 financing