- SBA loans offer up to 25-year terms for commercial real estate—significantly longer than conventional 5-10 year commercial mortgages.
- Down payments as low as 10% (or 5% cash with qualifying seller financing) compared to 20-30% for conventional loans.
- SBA 7(a) is more flexible and faster; SBA 504 offers lower fixed rates but requires two loans and takes longer.
- Your business must occupy at least 51% of existing buildings or 60% of new construction.
Looking to buy, build, or renovate commercial real estate for your business? SBA loans offer exceptional terms for owner-occupied commercial property—up to 25-year terms, lower down payments, and competitive rates.
This guide covers everything you need to know about using SBA financing for real estate, including when to use SBA 7(a) vs. 504 loans.
SBA Real Estate Financing Overview
Why Use SBA Loans for Real Estate?
SBA real estate loans offer significant advantages over conventional commercial mortgages:
- Longer terms: Up to 25 years (vs. 5-10 year conventional terms)
- Lower down payments: As low as 10% (vs. 20-30% conventional)
- Fully amortizing: No balloon payments at term end
- Competitive rates: SBA rates are capped by regulation
- Combine purposes: Finance real estate plus working capital in one loan
Two Programs for Real Estate
The SBA offers two main programs for commercial real estate:
- SBA 7(a) Loans: Most flexible, up to $5 million, 25-year terms
- SBA 504 Loans: Fixed-rate, up to $5.5 million SBA portion, 25-year terms
SBA 7(a) vs. 504 for Real Estate
When to Use SBA 7(a)
SBA 7(a) is typically best when:
- You need flexibility (can combine real estate with working capital, equipment)
- Total project is under $3 million
- You want one loan from one lender
- Speed is important (faster than 504)
- You’re acquiring a business that includes real estate
When to Use SBA 504
SBA 504 may be better when:
- You want the lowest possible fixed rate
- Project cost exceeds $3 million
- You’re purchasing or constructing a building
- You prioritize lowest monthly payment over speed
- The property will be primarily owner-occupied
Comparison Table
| Feature | SBA 7(a) | SBA 504 |
|---|---|---|
| Maximum loan amount | $5 million | $5.5 million (CDC portion) |
| Maximum project size | $5 million | Unlimited (CDC portion capped) |
| Interest rate type | Variable or fixed | Fixed (CDC portion) |
| Maximum term (real estate) | 25 years | 25 years |
| Down payment | 10-20% | 10-15% |
| Number of loans | 1 | 2 (bank + CDC) |
| Speed to close | 45-75 days | 60-90 days |
| Can combine with working capital | Yes | No (fixed assets only) |
For business acquisitions that include real estate, SBA 7(a) is almost always the better choice—it lets you finance the business purchase, real estate, and working capital in a single loan with one lender.
SBA Real Estate Loan Amounts and Terms
Maximum Loan Amounts
| Program | Maximum | Notes |
|---|---|---|
| SBA 7(a) | $5 million | Single loan from one lender |
| SBA 504 (CDC portion) | $5.5 million | Plus bank loan for 50% of project |
| 7(a) + Conventional (Pari Passu) | $5M SBA + conventional | For larger projects |
For projects exceeding $5 million, pari passu structures combine SBA with conventional financing.
Repayment Terms
Both SBA 7(a) and 504 offer up to 25-year terms for real estate—significantly longer than the 5-10 year terms typical of conventional commercial mortgages.
- Real estate purchase: Up to 25 years
- Construction: Up to 25 years (may include construction period)
- Renovation/improvement: Up to 25 years
SBA loans are fully amortizing over their term—no balloon payments. This provides predictable payments and builds equity throughout the loan term, unlike conventional commercial mortgages that often require refinancing every 5-10 years.
Down Payment Requirements
Standard Requirements
| Program | Standard Down Payment |
|---|---|
| SBA 7(a) | 10-20% |
| SBA 504 | 10-15% |
Factors That Affect Down Payment
- Property type: Standard properties typically 10%; special-use properties may require 15-20%
- Borrower experience: Industry experience may reduce requirements
- Business strength: Strong cash flow and financials improve terms
- Credit profile: Higher credit scores may qualify for lower down payment
Per SBA rules effective July 2025, seller notes on full standby can count toward equity injection. With proper structure: minimum 5% from buyer (cash or qualified sources) + up to 5% from seller note on full standby = 5% cash down on qualifying transactions.
SBA Real Estate Interest Rates (2026)
SBA 7(a) Rates
SBA 7(a) real estate loans follow standard SBA rate caps tied to Prime:
| Loan Amount | Maximum Rate |
|---|---|
| $50,000 or less | Prime + 6.5% |
| $50,001 – $250,000 | Prime + 6.0% |
| $250,001 – $350,000 | Prime + 4.5% |
| Over $350,000 | Prime + 3.0% |
With Prime at 7.50% (February 2026), most real estate loans price between 10% and 11% for 7(a).
SBA 504 Rates
SBA 504 offers fixed rates based on 10-year and 20-year Treasury rates plus a spread. As of February 2026, 504 rates for real estate range from approximately 5.5% to 6.5% fixed for the CDC portion.
The bank’s first mortgage portion (50% of project) is typically priced separately, often at variable rates.
Eligibility Requirements
Business Requirements
- For-profit business: Must be organized for profit
- Operating in the U.S.: Property must be in the United States
- Size standards: Must meet SBA size requirements
- Owner-occupied: Business must occupy at least 51% of property
Borrower Requirements
- Personal guarantee: Required from all owners with 20%+ ownership
- Credit history: Acceptable credit (typically 680+ preferred)
- Equity investment: Must contribute equity to the project
- Experience: Industry or management experience helpful
Property Requirements
- Must be used for business purposes
- Must meet SBA environmental requirements
- Must be appraised by SBA-approved appraiser
- Cannot be used for speculation or investment
Eligible Property Types
Common Eligible Properties
- Office buildings: Professional offices, medical practices
- Retail space: Storefronts, shopping centers
- Industrial: Warehouses, manufacturing facilities
- Mixed-use: Commercial with residential (if 51%+ commercial)
- Restaurants: Full-service and quick-service
- Hotels/motels: Hospitality properties
- Medical facilities: Clinics, urgent care, dental offices
- Automotive: Service centers, dealerships
- Self-storage: When owner-operated
Some properties are considered “special-use” and may require higher down payments (15-20%) or additional underwriting: gas stations, car washes, bowling alleys, golf courses, and funeral homes. These properties have limited alternative uses, which increases lender risk.
Ineligible Properties
- Rental/investment properties (not owner-occupied)
- Speculative real estate purchases
- Properties for ineligible businesses
Owner-Occupancy Requirement
Occupancy Rules by Property Type
Per SBA SOP 50 10 8, owner-occupancy requirements differ based on whether you’re purchasing an existing building or constructing new:
| Property Type | Minimum Owner-Occupancy |
|---|---|
| Existing building | 51% |
| New construction | 60% |
Occupancy is measured by square footage.
Timing Requirements
- Existing buildings: Must meet 51% occupancy at closing or within reasonable time
- New construction: Must meet 60% occupancy within 3 years of completion
You can rent out up to 49% of the property to tenants. Rental income can be included in cash flow analysis to support loan qualification—a nice way to offset your occupancy costs while still qualifying for SBA financing.
Application Process
Step 1: Gather Documentation
Real estate SBA loans require:
- Standard SBA documents: Form 1919, personal financial statements, tax returns
- Property information: Purchase agreement, property description, photos
- Environmental: Phase I environmental (ordered during process)
- Appraisal: Commercial appraisal by SBA-approved appraiser
- Business financials: P&L, balance sheet, projections
Step 2: Submit to Lenders
Submit your application to multiple SBA lenders for competitive term sheets. Real estate expertise varies significantly among lenders.
Step 3: Underwriting
Lender orders third-party reports:
- Appraisal: 2-3 weeks
- Phase I Environmental: 2-3 weeks
- Title search: 1-2 weeks
Step 4: SBA Authorization
Lender submits to SBA for authorization. PLP lenders can authorize in 3-5 days; standard processing takes 5-10 business days.
Step 5: Closing
Sign loan documents, fund escrow, and close on the property.
Timeline and Closing
Typical Timeline
| Phase | SBA 7(a) | SBA 504 |
|---|---|---|
| Application to term sheet | 1-2 weeks | 2-3 weeks |
| Underwriting + third-party reports | 3-4 weeks | 4-5 weeks |
| SBA authorization | 1 week | 2 weeks |
| Closing | 1-2 weeks | 1-2 weeks |
| Total | 45-75 days | 60-90 days |
Expediting the Process
- Have all documents ready before making an offer
- Choose experienced real estate SBA lenders
- Order Phase I environmental early (can be done pre-approval)
- Respond to lender requests immediately
- Work with an SBA broker familiar with real estate transactions
SBA loans offer the best terms available for owner-occupied commercial real estate—25-year fully amortizing terms, down payments as low as 10%, and competitive rates. Choose SBA 7(a) for flexibility and speed, or SBA 504 for the lowest fixed rates on larger projects. Either way, you’ll enjoy significantly better terms than conventional commercial mortgages.
Frequently Asked Questions
Yes, both SBA 7(a) and 504 loans can be used to purchase commercial real estate, with terms up to 25 years and down payments as low as 10%.
Standard is 10% for SBA 7(a) and 10-15% for SBA 504. With seller financing on full standby, you may qualify for 5% cash down per current SBA guidelines.
Yes. Per SBA rules, your business must occupy at least 51% of existing buildings or 60% of new construction (by square footage). You can rent out the remaining space to tenants.
504 offers lower fixed rates but takes longer and requires two loans. 7(a) is more flexible and faster. For projects over $3M focused on real estate, 504 often makes sense. For smaller deals or when you need working capital too, 7(a) is often better.
Typically 45-75 days for SBA 7(a) and 60-90 days for SBA 504. Third-party reports (appraisal, environmental) are often the longest items in the timeline.
Yes. Both SBA 7(a) and 504 can finance new construction. The timeline is longer due to the construction period, but terms remain favorable with up to 25-year amortization.
