What is the difference between SBA 7(a) and SBA 504 loans for commercial property financing in Arizona?

May 08, 2024

SBA 7(a) vs. SBA 504 Loans: Understanding the Differences for Commercial Property Financing in Arizona

When it comes to financing commercial properties in Arizona, small business owners have various options to consider. Two popular choices are the SBA 7(a) loan and the SBA 504 loan. Understanding the differences between these loan programs can help you make an informed decision that best suits your business needs.

Loan Structure

The SBA 7(a) loan is a general-purpose loan that can be used for a wide range of business expenses, including purchasing real estate. On the other hand, the SBA 504 loan is specifically designed for financing fixed assets like commercial real estate and equipment.

Loan Amounts and Terms

With an SBA 7(a) loan, you can borrow up to $5 million, while SBA 504 loans can go up to $20 million. The repayment terms for the 7(a) loan typically range from 10 to 25 years, whereas 504 loans offer longer terms of up to 25 or 30 years.

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Down Payment Requirements

One key difference between the two loan programs is the down payment requirement. SBA 7(a) loans usually require a down payment of around 10% to 20%, while SBA 504 loans typically require a down payment of 10%.

Interest Rates

Interest rates for SBA loans are competitive and typically lower than conventional loans. The interest rates for SBA 7(a) loans are usually variable, while SBA 504 loans offer fixed rates, providing borrowers with more stability.

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Eligibility Criteria

Both SBA loan programs have specific eligibility criteria that businesses must meet to qualify. For the 7(a) loan, businesses must operate for profit, meet SBA size standards, have good credit, and demonstrate the ability to repay the loan. The 504 loan program is geared towards businesses that plan to create jobs or promote community development.

Use of Funds

While SBA 7(a) loans offer more flexibility in how the funds can be used, SBA 504 loans have restrictions on how the funds can be allocated. The 504 loan is specifically earmarked for fixed assets like real estate and equipment.

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Application Process

The application process for both SBA loan programs can be time-consuming and require extensive documentation. Working with a lender experienced in SBA loans can help streamline the process and increase your chances of approval.


Choosing between an SBA 7(a) loan and an SBA 504 loan for commercial property financing in Arizona depends on your specific business needs and financial goals. Consider the loan structure, terms, down payment requirements, and eligibility criteria to determine which loan program aligns best with your objectives.