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 2.65%

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 2.65%
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)
OR

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