🏢 SBA 7(a) vs. SBA 504: Which SBA Loan Is Best for Buying Your Commercial Building?

💼 Buy Your Building with Confidence: SBA 7(a) vs. SBA 504 Explained for Business Owners

SBA 7(a) vs. SBA 504: Which SBA Loan Is Right for Buying Your Commercial Building?

Owning the building where your business operates can be one of the smartest financial decisions you'll ever make. Instead of paying rent to a landlord, every monthly payment builds equity in an asset your business owns.

Fortunately, the U.S. Small Business Administration (SBA) offers two outstanding financing programs designed specifically for owner-occupied commercial real estate:

·SBA 7(a)

·SBA 504

While both help businesses purchase commercial property, each serves different purposes. Understanding the differences can save thousands of dollars and help you choose the right financing strategy.

At Medallion Funds, we help business owners evaluate both programs to determine which loan best fits their goals.

Why Buy Instead of Lease?

Purchasing your commercial building provides several long-term advantages:

·Build equity instead of paying rent

·Protect against rising lease rates

·Gain tax advantages through depreciation and interest deductions*

·Create long-term business stability

·Potentially increase business value

·Control your own property improvements

(*Always consult your CPA regarding tax matters.)

SBA 7(a): Maximum Flexibility

The SBA 7(a) loan is the SBA's flagship lending program.

It offers tremendous flexibility because proceeds may be used for:

·Purchasing owner-occupied commercial real estate

·Building acquisition

·Renovations

·Furniture and equipment

·Working capital

·Business acquisition

·Refinancing eligible debt

Typical SBA 7(a) Highlights

·Up to approximately 90% financing

·Loan amounts up to SBA limits

·Up to 25-year amortization on real estate

·Variable or fixed interest rate options

·Faster approval process than many conventional loans

·One loan can finance multiple business needs

SBA 7(a) Works Best For

·Medical offices

·Dental practices

·Retail businesses

·Restaurants

·Contractors

·Professional offices

·Businesses needing working capital in addition to purchasing real estate

SBA 504: Designed for Commercial Real Estate

The SBA 504 program is specifically designed for purchasing owner-occupied commercial real estate and major equipment.

Unlike the 7(a), the financing is split into three parts:

·Approximately 50% from a conventional lender

·Approximately 40% from a Certified Development Company (CDC)

·Approximately 10% borrower equity (many transactions)

Because part of the loan carries a long-term fixed rate, borrowers often receive excellent payment stability.

Typical SBA 504 Benefits

·Approximately 10% down payment

·Long-term fixed interest rates on the SBA portion

·Lower monthly payments

·Excellent for long-term ownership

·Strong financing for larger commercial buildings

SBA 504 Works Best For

·Manufacturing companies

·Industrial businesses

·Medical office buildings

·Warehouses

·Office buildings

·Business owners planning to remain in one location for many years

Side-by-Side Comparison

Feature

SBA 7(a)

SBA 504

Purpose

Real estate plus working capital

Commercial real estate & equipment

Down Payment

Typically around 10%

Often around 10%

Interest Rate

Variable or Fixed

Fixed on SBA portion

Loan Structure

One lender

Bank + CDC

Flexibility

Excellent

Moderate

Working Capital

Yes

No

Renovations

Yes

Limited to project

Best For

Flexibility

Long-term ownership

Which SBA Loan Should You Choose?

Choose SBA 7(a) if you need:

·Working capital

·Renovation funds

·Equipment financing

·One loan for multiple business purposes

·Greater flexibility

Choose SBA 504 if you want:

·The lowest long-term payment

·Fixed-rate financing

·A building you'll own for many years

·Lower borrowing costs over time

Why Work with Medallion Funds?

Every business is different.

The "best" SBA loan depends on your:

·Cash flow

·Down payment

·Occupancy plans

·Business type

·Growth strategy

·Future expansion

At Medallion Funds, we compare multiple SBA lending options to help you select the financing structure that aligns with your long-term business objectives.

Whether you're purchasing your first office, expanding into a larger facility, or buying the property you've been leasing, we can guide you through every step of the process.

Ready to Own Your Building?

Owning commercial real estate can strengthen your balance sheet, create long-term wealth, and provide greater control over your business's future.

If you're considering purchasing an office, warehouse, retail building, medical facility, or industrial property, contact Medallion Funds to discuss whether an SBA 7(a) or SBA 504 loan is the better fit.

Smart financing starts with the right strategy—not just the lowest rate.

Bill Rapp
Partner & Capital Advisor | Medallion Funds

Commercial Lending Nationwide

Residential Lending in AL, CA, CO, NV & TX
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© Bill Rapp, Medallion Funds LLC, Director of Capital Advisory