Business Loans

SBA Real Estate Loan Options

Feb 24, 2023 • 7 min read
Table of Contents

      The U.S. Small Business Administration offers a few different real estate loans to help business owners purchase, renovate, and build properties that support their companies. There are two primary SBA commercial real estate loans to choose from: the 7(a) loan and the 504 loan. Each one is designed for different purposes and has its own terms and eligibility requirements. Read about both options so you can pick the right one for your small business. 

      7(a) Loan504 Loan
      UsesPurchasing, leasing, building, or improving a building or landPurchasing, building, or improving a new or existing building, land, utilities, or landscaping
      Loan AmountUp to $5 millionUp to $5.5 million
      Repayment PeriodUp to 25 yearsUp to 25 years
      Owner-occupancy requirementsExisting real estate: 51% 
      New construction: 60% 
      Existing real estate: 51% 
      New construction: 60% 

      SBA 7(a) Loans

      SBA 7(a) loans are a versatile source of funding for small business owners that can be used for real estate. Here’s how they work.


      For-profit companies that meet the SBA’s definition of “small business” may apply for a 7(a) loan. In addition to demonstrating the need for financing, the owners must be financially invested in their companies and have tapped into other resources before applying—including their personal assets.

      When using an SBA 7(a) loan for real estate, you must meet the following occupancy requirements, depending on the loan purpose:

      • Existing real estate purchase: Property must be at least 51% owner-occupied
      • New real estate construction: Property must be at least 60% owner-occupied

      Use Of Loan Funds

      SBA 7(a) loans can be used for a variety of reasons, such as working capital, inventory, and debt refinancing. For real estate-related financing, you can apply to use the funds for any of the following:

      • Purchasing or leasing land
      • Improving street or parking
      • Purchasing, building, or improving a building

      Repayment Terms

      Small businesses may borrow up to $5 million with a 7(a) loan, with payments spread out over up to 25 years. Interest rates are based on the current prime rate, plus an additional percentage ranging from 2.75% to 4.75%. You’ll also need to make a down payment, which is set by your lender in your loan offer. This ensures you have a vested interest in keeping up with your loan payments over time.

      SBA 504 Loans

      504 loans from the SBA are designed to help with large asset purchases, including real estate. It has a few key differences when compared to a 7(a) loan.


      Small businesses can apply for the 504 loan if the business has a tangible net worth of under $15 million and has had an average net income of under $5 million (after federal taxes) for the previous two years.

      The 504 loan comes with the same owner-occupancy requirements as the 7(a) loan: existing real estate purchases must be at least 51% owner-occupied, while new construction must be at least 60% owner-occupied. 

      Use Of Loan Funds

      504 loans can be used for purchases, construction, or improvement projects. Eligible projects include:

      • Purchasing existing buildings or land
      • Purchasing or building new facilities
      • Improving or modernizing existing facilities, land, streets, utilities, parking lots, and landscaping

      Repayment Terms

      With a 504 loan, you can borrow up to $5 million for most purchases, or up to $5.5 million for eligible energy efficient or manufacturing projects. These real estate loans come with a 25-year repayment term. Interest rates are tied to the five-year and 10-year U.S. Treasury issues, with a pegged rate above the current rate. 

      The business owner is typically responsible for 10% of the costs as a down payment. Another 40% is borrowed from a Certified Development Company (CDC), and the remaining 50% is borrowed from a bank or credit union.

      Learn more about how SBA loans can help you grow your business and increase your efficiency.


      An SBA Express loan helps small business owners access financing more quickly by using an SBA-approved lender. You can use an Express loan or line of credit towards real estate purchases. Just note that the maximum financing amount is just $500,000, compared to a $5-million maximum with the 7(a) and 504 loan programs.

      Although SBA 7(a) and 504 loans can be used for commercial real estate, the properties must be commercial and majority owner-occupied. That means you cannot purchase apartment buildings or other residential units with SBA loans. And if you’re purchasing office space, your company must occupy at least 51% of the space (and more if you’re purchasing new construction).

      Quickly compare loan offers from multiple lenders.

      Applying is free and won’t impact your credit.

      About the author
      Lauren Ward

      Lauren Ward is a personal finance and tech writer with a passion to help consumers make smart financial decisions. Her work has appeared in a variety of publications, including Time and MSN. When she's not writing, she loves gardening and playing board games with her family.

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