The U.S. Small Business Administration doesn't usually lend money directly. It guarantees part of loans made by banks and other lenders, which lets them offer longer terms and lower down payments than a typical commercial loan. The two programs business owners use most are SBA 7(a) and SBA 504.
The short answer
- SBA 7(a) is the flexible, all-purpose loan: buying a business, working capital, equipment, refinancing business debt, and real estate.
- SBA 504 is built for big fixed assets: buying or building owner-occupied commercial real estate or long-life equipment, usually with a long-term fixed rate on part of the loan.
Side-by-side comparison
| SBA 7(a) | SBA 504 | |
|---|---|---|
| Best for | Business acquisitions, working capital, equipment, real estate, refinancing | Owner-occupied real estate, construction, heavy equipment |
| Maximum SBA loan | $5 million | $5 million debenture (higher for certain manufacturing and energy projects) |
| Structure | One loan from one lender | Typically 50% bank loan + 40% CDC/SBA loan + 10% borrower |
| Down payment | Varies; generally at least 10% for business acquisitions and startups | Usually 10%; 15% for a startup or special-purpose property; 20% if both |
| Rate | Usually variable, tied to Prime, with SBA caps on the spread | Bank portion set by the bank; CDC portion is fixed, tied to Treasury rates |
| Term | Up to 25 years for real estate; generally up to 10 years for equipment, working capital and business acquisition | 10, 20 or 25 years |
| Goodwill / business purchase | Yes | No |
| Working capital | Yes | No |
When SBA 7(a) makes more sense
Choose 7(a) when you are buying an existing business (including its goodwill), need working capital, or want one loan that covers real estate, equipment and inventory together. Most gas station and convenience store acquisitions we see use 7(a), because the purchase price includes business value — fuel volume, store sales and goodwill — not just real estate. See our gas station financing page.
When SBA 504 makes more sense
Choose 504 when you're buying or building a building your business will occupy (generally at least 51% for an existing building) or buying major equipment, and you want a long-term fixed rate on a large part of the loan. Because special-purpose properties (such as gas stations, hotels and car washes) carry a higher down payment under 504, compare both programs before deciding.
2026 eligibility changes to know
Under SBA rules effective March 1, 2026, 100% of a business's direct and indirect owners must be U.S. citizens or U.S. nationals whose principal residence is in the United States. Lawful permanent residents (green card holders) qualified before that date but no longer do for new 7(a) and 504 loans. Loans funded before March 1, 2026 are not affected, but a refinance is treated as a new application. Proposals have been introduced in Congress to restore green card holder eligibility; none had passed as of this writing, so confirm the current rules before you apply. Because the rule covers 100% of owners, adding a U.S. citizen partner does not solve it on its own. If your ownership doesn't meet this rule, conventional commercial loans, bridge financing or seller financing may still be options — ask us.
The SBA also updated its underwriting rules for smaller 7(a) loans in 2026. Lenders still look closely at cash flow (debt service coverage), credit, industry experience and the business plan — and first-time owners need a strong package.
How we help
We coach first-time SBA borrowers through packaging: business plan, projections, industry experience, and the lender's document list. A complete, well-organized file is often the difference between "too risky" and approved. Start with our SBA 7(a) or SBA 504 program pages, or join our free SBA Loans for New Business Owners seminar.
Frequently Asked Questions
What is the main difference between SBA 7(a) and SBA 504?
SBA 7(a) is a flexible loan for business purchases, working capital, equipment and real estate. SBA 504 is for owner-occupied real estate and major equipment, with a long-term fixed rate on the CDC portion.
How much down payment do I need for an SBA loan?
SBA 504 usually requires 10%, rising to 15% for startups or special-purpose properties and 20% if both apply. SBA 7(a) down payments vary by lender and deal, and business acquisitions and startups generally need at least 10%.
Can I use an SBA loan to buy a gas station?
Yes. Gas stations are commonly financed with SBA 7(a) because the price includes business value and goodwill. SBA 504 can also be used for the real estate, but special-purpose properties require a larger down payment.
Can green card holders get SBA loans in 2026?
Under SBA rules effective March 1, 2026, all direct and indirect owners must be U.S. citizens or U.S. nationals with a principal residence in the U.S., so businesses with lawful permanent resident owners are not eligible for new 7(a) or 504 loans. Green card holders were eligible before that date; proposals in Congress would restore eligibility, but none had passed as of October 2026.
Want to know which option fits your situation?
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Get Pre-Qualified or call 510-786-8739This article is for general educational purposes only and is not a commitment to lend or an offer of credit. Loan programs, guidelines, rates and eligibility change often and vary by lender; all loans are subject to credit approval, underwriting and property eligibility. SI MTG is a mortgage broker, not a lender. This is not tax or legal advice — consult a qualified tax professional or attorney about your situation. NMLS #300923 · CA DRE #01480904 · Equal Housing Opportunity.