When it comes to financing your business, SBA loans stand out as one of the most reliable and flexible options available. Backed by the U.S. Small Business Administration (SBA), these loans are designed to help small businesses thrive by providing access to affordable funding with favorable terms.
Whether you’re looking to start a new venture, expand an existing one, or simply manage cash flow, SBA loans can be the key to unlocking your business’s full potential.
SBA loans are not directly issued by the SBA but are offered through participating lenders, such as banks and credit unions. The SBA guarantees a portion of the loan, reducing the risk for lenders and making it easier for small businesses to qualify. This guarantee allows lenders to offer competitive interest rates, longer repayment terms, and lower down payments compared to traditional business loans.
Comparing SBA 7(a) vs. 504 for Small Business Owners
NexGen Lending can help you decide on the best loan options for your business, but having a basic understanding before you start can help. Also, the SBA allows you to take out multiple loans for your business operation since a single loan might not be enough to meet your financing needs, so it’s helpful to familiarize yourself with the different types.
Here are some key differences between SBA 504 loans and SBA 7(a) loans.
SBA 504 Loan | SBA 7(a) Loan | |
---|---|---|
Loan Purpose | Existing buildings or land, New Facilities, Machinery, Equipment, Improvements to land and existing facilities. | Real Estate, Working Capital, Business Debt, Furniture, Fixtures and Supplies. |
Maximum Loan Amount | Up to $5.5 million | Up to $5 million |
Repayment Term | 10, 20 or 25 year terms | Up to 25 years for real estate or up to 10 years for equipment, working capital or inventory loan |
Down Payment | Typically 10% | 10% to 30% |
Interest Rate | Fixed Rate | Fixed and variable rate |
Eligibility Factors | Business net worth, net income and for-profit status | Income source, credit history and location |
Fees | Around 3% | Varies |