SBA 504 vs 7(a) — Which Should You Use?
SBA 504 is the gold standard for owner-occupied CRE acquisition or ground-up construction. It splits the deal 50% bank / 40% CDC debenture / 10% borrower (15% for special-use or new businesses). The CDC portion locks in a fixed rate for 25 years — historically 100–200 bps below conventional CRE rates.
SBA 7(a) is the workhorse general-purpose loan. Up to $5MM. Used for acquisition, working capital, equipment, partner buyouts, even debt refinance. LTV can reach 90%. Rates float prime + spread.
Eligibility Rules That Matter
- Occupancy: 51% of existing buildings, 60% of new construction
- Size: Tangible net worth ≤ $20MM, average net income ≤ $6.5MM (504); revenue/employee tests vary by NAICS (7a)
- Personal guarantee: Required from anyone owning ≥20%
- Use: Cannot be passive investment real estate
Why Florida Business Owners Love SBA
Florida's small business ecosystem — medical practices, manufacturing, hospitality, professional services — is built on SBA financing. With FL Property Tax breaks for owner-occupied use and stronger appreciation than the national average, 504 deals pencil exceptionally well here.
Pair this with the Mortgage Calculator, the DSCR Calculator, and the FL Closing Costs Calculator for the full SBA-deal pro forma.