The  United States Small Business Administration offers government-backed loans that help small- to mid-sized companies get the financing they need for various goals, whether they want to invest in inventory, buy equipment or supplies or hire new workers so they can continue to grow and thrive. Two of the most common types of SBA loans are called 504 loans and 7(a) loans. While SBA loans have a higher maximum loan amount, 7(a) loans have a wider variety of potential uses.

What Is an SBA 504 Loan?

澳洲幸运5官方开奖结果体彩网:SBA 504 loans are designed for small businesses that need long-term financing in amounts of up to $5 million. Up to $5.5 million may be borrowed with these loans for small manufacturers or specific energy projects. These loans have 澳洲幸运5官方开奖结果体彩网:fixed interest rates.

To 澳洲幸运5官方开奖结果体彩网:qualify for an SBA 504 loan, small businesses must:

• Operate as a for-profit company within the U.S.
• Report a tangible net worth below $15 million
• Report an average net income below $5 million after federal income taxes for the two years before the application

Repayment terms for SBA♏ 504 loans can las♛t for 10, 20, or 25 years.

What Is an SBA 7(a) Loan?

SBA 7(a) loans are geared toward small companies that need financing for growth, including purchasing machinery and equipment, improving real estate or buildings, or as 澳洲幸运5官方开奖结果体彩网:working capital. These loans also have a maximum loan amount of $5 million, although loans made under the SBA Express and Export Express delivery methods are capped at $500,000.

To qualify for an SBA 7(a) loan, small businesses m🎃𒉰ust:

• Operate as a for-profit company within the United States
• Be small under SBA size requirements
• Not be a type of ineligible business
• Be 澳洲幸运5官方开奖结果体彩网:creditworthy and have funds to repay the loan
• Be unable to obtain similar financing elsewhere

SBA 7(a) lo🎀ans have durations that last a maximum ofඣ 25 years.

Key Differences Between SBA 504 and 7(a) Loans

While both SBA 504 and SBA 7(a) loans can have similarly high loan amounts and lengthy repayment terms, there are some key differences betwee𒀰n these two loan t𒆙ypes.

Purpose and Use of Funds

Where SBA 504 loans can be used for assets that promote business growth or job creation, they cannot be used as working capital. Overall, 7(a) loans offer a wider range of potential uses, including promoting job and business growth, 澳洲幸运5官方开奖结果体彩网:refinancing debt, working capital, chang🦹e of ownership of a company,꧅ and more.

Loan Amounts

SBA 7(a) loans are offered in amounts of up to $5 million. SBA 504 loans normalℱly max out at $5 milౠlion, but certain borrowers can get up to $5.5 million.

Interest Rates and Fees

澳洲幸运5官方开奖结果体彩网:Interest rates for SBA 504 loans are tied to an increment above the current market rate for 10-year U.S. Treasury issues, per the SBA. In fiscal year 2025, an annual service fee of 0.331% applies. SBA lenders may also charge their own fees.

Interest rates for SBA 7(a) loans vary based on the borrower and the lender, but certain maximum rates apply based on the loan amount.

SBA 7(a) loans can require you to pay an upfront SBA Guaranty Fee. Annual service fees also apply, but they’re paid by the lende🦩r and cannot be passed on to the borr༒ower.

Collateral Requirements

With SBA 504 loans, the assets being financed (real estate, equipment, etc.) serve as 澳洲幸运5官方开奖结果体彩网:collateral for the loan. With SBA 7(a) loans, collateral may or may not be required depending on the loan amount and delivery method.

Repayment Terms

SBA 504 loans come with repayment terms of 10, 20 or 25 years. SBA 7(a) loans𝕴, meanwhile, have a maximum repayment term of 25 years.

The Bottom Line

The SBA offers different types of funding for different purposes, wh🎐ich means you should carefully compare your borrowing options before you move forward. Consider how much funding your business needs, what you need to use the money for, and how long you’ll need to pay it back. From there, you can narrow down the right type 𒀰of small business loan for your goals.