When it comes to financing growth, purchasing property, or acquiring equipment, many business owners turn to Small Business Administration (SBA) loans. Two of the most popular SBA loan programs—SBA 7(a) and SBA 504—offer powerful benefits. But which one is right for your business?
At Tikal Funding, LLC, we help entrepreneurs navigate these options and secure financing tailored to their goals. Here’s a clear side-by-side comparison of SBA 7(a) and SBA 504 loans to help you make an informed decision.
What Is an SBA 7(a) Loan?
The SBA 7(a) loan is the most flexible and widely used SBA program. It’s ideal for general business purposes and provides funding for a wide range of needs.
Typical Uses Include:
- Working capital
- Business acquisition
- Equipment purchase
- Inventory financing
- Leasehold improvements
- Real estate acquisition (if occupied by the business)
Loan Features:
- Loan Amounts: Up to $5 million
- Terms: Up to 10 years for most uses, 25 years for real estate
- Interest Rates: Variable or fixed, usually based on the Prime Rate + a spread
- Down Payment: Typically 10% to 20%
- Collateral: Often required, especially for loans over $350,000
Best For:
Businesses seeking flexible funding for mixed use—especially those looking to acquire another business, consolidate debt, or cover multiple operating expenses.
What Is an SBA 504 Loan?
The SBA 504 loan is specifically designed for purchasing fixed assets that help grow your business—primarily real estate and equipment.
This program involves two lenders:
- A Certified Development Company (CDC) provides 40% of the funding.
- A conventional lender (like Tikal Funding) provides 50%.
- The borrower contributes the remaining 10% (may be more for startups or specialized properties).
Typical Uses Include:
- Purchasing or constructing commercial real estate
- Buying long-term machinery or equipment
- Renovating or improving existing facilities
Loan Features:
- Loan Amounts: Up to $5.5 million (CDC portion), higher with lender portion
- Terms: 10, 20, or 25 years (fixed rate)
- Interest Rates: Fixed rates, often lower than market
- Down Payment: Usually 10%
- Collateral: Secured by the asset being financed
Best For:
Businesses making long-term investments in physical infrastructure—such as buying a building or upgrading equipment for expansion.
SBA 7(a) vs. SBA 504: Side-by-Side Summary
| Feature | SBA 7(a) | SBA 504 |
| Use of Funds | Broad (working capital, business acquisition, real estate, etc.) | Fixed assets only (real estate, equipment) |
| Max Loan Size | $5 million | $5.5 million (CDC), up to ~$20M total |
| Terms | Up to 25 years (real estate) | 10–25 years |
| Interest Rate | Variable or fixed | Fixed |
| Structure | Single loan | Two-part loan (CDC + lender) |
| Down Payment | 10–20% | Typically 10% |
Which Loan Is Right for You?
Ask yourself:
- Do I need flexible funds for operating expenses or business acquisition? → SBA 7(a)
- Am I investing in a long-term asset like a building or equipment? → SBA 504
- Am I looking for a lower fixed rate and willing to meet the specific usage criteria? → SBA 504
- Do I need faster funding and less structural complexity? → SBA 7(a)
Both loans offer favorable terms and the SBA guarantee, which reduces lender risk and improves approval odds—even for businesses that may not qualify for conventional loans.
How Tikal Funding Can Help
At Tikal Funding, LLC, we help businesses of all sizes evaluate their financing options and choose the best loan structure for their needs. Whether you’re purchasing property, expanding your operations, or acquiring a new business, our experienced team is here to guide you through the SBA loan process from start to finish.
Contact us today to schedule a free consultation and discover which SBA loan is right for your business goals.
