The Small Business Administration (SBA) offers 504 and 7(a) loans that can be used to purchase real estate. You can also use them to construct new facilities, renovate existing buildings and make land improvements.
For most borrowers, the choice between the two comes down to rate versus simplicity. A 504 loan usually gets you a lower fixed rate on a large part of the loan. A 7(a) loan is one loan from one lender, and you can also use it for working capital.
How much do you need?
Types of SBA commercial real estate loans
There isn’t a dedicated SBA commercial real estate loan program offered by the Small Business Administration. Instead, SBA real estate loans are offered through the 504 and 7(a) loan programs. SBA microloans cannot be used for real estate purchases.
Although SBA 504 and 7(a) loans share similarities, each offers its own advantages for financing your commercial real estate project.
SBA 504 loans
SBA 504 loans, also known as CDC/504 loans, are designed specifically for large equipment and real estate-related purchases. These loans come from three parties:
A Certified Development Company (40%).
A third-party lender, like a bank or credit union (50%).
The borrower (10%).
For example, on a $1 million building purchase, a bank would lend about $500,000, a CDC would lend about $400,000 and you'd put down about $100,000.
If you’re a new business and/or using your loan for what the SBA deems a “special purpose property,” you may need to put down 15% or 20%, depending on the project. The SBA will provide a 100% guarantee on the CDC portion of the loan.
Use cases
SBA 504 loans can provide funding for:
Land or building purchases.
Land improvements, such as adding curbs, gutters or parking lots.
Building improvements, such as changing the exterior or updating electrical systems.
Equipment and machinery purchases.
Debt refinancing (in certain scenarios).
SBA 504 loans cannot be used for working capital or inventory purchases. 504 loan projects must also meet job creation or public policy goals as laid out by the SBA.
Rates and terms
The CDC portion of a 504 loan is usually capped at $5 million, or $5.5 million for qualifying manufacturing and energy projects. There's no cap on the total project cost, so the bank portion can make the overall project much larger. Real estate loans have 20- or 25-year terms. Equipment loans have 10-year terms.
Interest rates on these SBA real estate loans are based on both the CDC and bank portion of the loan. The bank portion can have a fixed or variable interest rate that will vary based on your lender and business qualifications. However, this rate is subject to a maximum set by the SBA. Currently, the maximum is the prime rate plus 6%.
Interest rates on the CDC portion of the loan are tied to five- and 10-year U.S. Treasury notes and typically range from 5% to 7%.
SBA 7(a) loans
The most popular type of SBA loan, 7(a) loans can be used for a variety of purposes, including real estate improvements and purchases. Unlike 504 loans, SBA 7(a) loans are issued solely by participating lenders, usually banks and credit unions. These loans are partially guaranteed by the SBA — up to 85% for loans of $150,000 or less and up to 75% for loans above $150,000.
Use cases
You can use the capital from an SBA 7(a) loan to fund:
Land purchases or leases.
Street, parking lot or landscaping improvements.
Building purchases, expansions or renovations.
New building construction.
Equipment purchases.
Inventory purchases.
Working capital.
Debt refinancing (in certain scenarios).
Rates and terms
SBA 7(a) loans are available in amounts up to $5 million; however, the average loan amount in fiscal year 2026 was $577,703. Repayment terms are up to 25 years for real estate loans, and up to 10 years for equipment, working capital and inventory loans.
Interest rates on 7(a) loans are set based on the prime rate, plus a spread that is negotiated between you and your SBA lender. This spread is subject to SBA maximums, which vary based on your loan size.
Currently, SBA 7(a) loan maximum rates range from 10% to 15%.
» MORE: Current SBA loan rates
Differences between SBA 504 and 7(a) loans
Although 504 and 7(a) loans can both be used as SBA real estate loans, the 504 loan can offer a lower fixed rate and more total financing. A 7(a) loan has more flexible uses and no job creation or community development goals.
Here are some of the important differences between these options.
» MORE: SBA 7(a) loan vs. 504 loan
Side-by-side comparison of SBA 504 and 7(a) loans
SBA 504 loan | SBA 7(a) loan | |
|---|---|---|
Loan amounts | On the CDC portion of the loan, up to $5 million, or $5.5 million for certain energy or manufacturing projects; no maximum limit on total project funding. | Up to $5 million. |
Interest rates | CDC portion: about 5% to 7% fixed. Bank portion: set by the lender, current maximum is prime plus 6%. | Current maximums range from 10% to 15%. (Varies based on lender and your qualifications.) |
Repayment terms | Up to 25 years for real estate purposes. | Up to 25 years for real estate purposes. |
Down payment | 10% to 20% or more. | 10% or more. |
Structure | Financing comes from three different sources:
| Financing issued by one SBA lending partner (usually bank or credit union). |
Use cases | Real estate or fixed asset related purposes only. | Real estate, equipment, inventory and working capital purposes. |
Requirements |
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How to qualify for an SBA real estate loan
The qualification requirements for 504 and 7(a) loans are largely similar. To get either of these real estate loans, you should:
Be a for-profit business.
Be physically located and doing business in the U.S.
Be a small business, as defined by the SBA.
Have good credit, typically a personal credit score of 650 or higher.
Ideally, have at least two years in business.
Have strong finances.
Your potential real estate project must also be at least 51% owner occupied for existing buildings and at least 60% owner occupied for new buildings.
For 504 loans, you must be able to show that your project will meet job creation or public policy goals.
Although you’ll need to meet specific SBA requirements for both of these loan options, other requirements can vary from lender to lender.
Who offers SBA commercial real estate loans?
If you’re looking for an SBA loan for commercial real estate, you have a number of options. SBA loans, including 7(a) and 504, are often offered by banks, credit unions and other financial institutions.
For 7(a) loans, you might start with a bank or credit union where you have an existing relationship. Similarly, for 504 loans, you can also talk to a bank or credit union, but a CDC will be an additional option. The SBA has a list of CDCs on its website. If you start with a bank, it may be able to help you find an eligible CDC — or vice versa.
For either loan type, you can also use the SBA’s Lender Match tool to get matched with a lender within two days of submitting your request.
» MORE: Compare the best SBA lenders
How to apply for an SBA real estate loan
Both SBA 504 and 7(a) loans have a detailed and lengthy application process. However, once you’ve found a lender, it can assist you in gathering the information and documentation you need to complete your application.
Typically, you’ll need the following:
SBA’s borrower information form.
Statement of personal history.
Personal financial statement.
Personal and business tax returns.
Business license.
Business financial statements.
Lease agreement, if applicable.
If you’re buying real estate, you’ll also need:
A real estate appraisal.
An environmental investigation report questionnaire.
A cost breakdown.
A copy of any purchase agreements.
For 504 loans, you'll need to show how your project will create jobs or meet a public policy goal.
Which SBA commercial real estate loan is right for you?
Both SBA 504 and 7(a) loans can provide competitive interest rates, long repayment terms and large business loan amounts.
You might prefer the 504 loan if you:
Can meet job creation or public policy goals.
Want a lower interest rate.
Only want to finance a real estate project.
On the other hand, you might prefer the 7(a) loan if you:
Want a simple loan structure.
Don’t meet job creation or public policy goals.
Want to use proceeds for other purposes in addition to real estate.
If you can’t qualify for an SBA real estate loan or need funds more quickly, you might consider alternatives, such as online business loans.
Frequently asked questions
Can you use an SBA loan to buy real estate?
Yes. SBA 504 loans and 7(a) loans can be used to buy real estate. These loans can also be used to construct new buildings and renovate and/or expand existing buildings.
When do you have to repay an SBA real estate loan?
Real estate loans from both the 7(a) and 504 programs can have terms up to 25 years. Your actual repayment terms will vary based on your lender, your business’s credentials and the loan purpose, among other factors.
What is the interest rate on an SBA commercial real estate loan?
The interest rate on an SBA commercial real estate loan varies based on your lender, loan type and ability to repay — but it's subject to SBA maximums. Current maximum SBA 7(a) loan rates are 10% to 15%. SBA 504 loan rates tend to range between 5% and 7% for the CDC portion of the loan.
Can you use an SBA loan for investment property?
No, you generally can’t use an SBA loan for an investment property. Owner-occupancy rules (that your active business must occupy a minimum portion of the property) exclude passive rental real estate.
Article sources
- 1.U.S. Small Business Administration. SOP 50 10 Lender and Development Company Loan Programs.
- 2.Federal Register. Interest Rates A Notice by the Small Business Administration on 10/01/2026.
- 3.U.S. Small Business Administration. 7(a) & 504 Lender Report. Accessed Nov 9, 2026.
