SBA 504 & SBA 7(a) Comparison

	SBA 504 Loan Commercial Real Estate and Equipment 90% Fixed Rate	SBA 7(a) Loan General Purpose
Loan Size	$250,000 to $5,000,000	$250,000 to $5,000,000
Interest Rate	Fixed Fully amortized through the term of the loan Interest rates on 504 loans are set monthly at the time of funding at an increment above the current market rate for five-year and ten-year U.S. treasury issues	Variable rate; some limited fixed-rate options Fully amortized through the term of the loan Interest rates are negotiated between the borrower and the lender subject to a mandated SBA ceiling and floor
Eligible Business Size	Business net worth not to exceed $15 million Average net profit after taxes for 2 consecutive years not to exceed $5 million	Determined by industry type Annual sales not to exceed range of $750,000 to $33.5 million for retail, service and agriculture Number of employees not to exceed range of 100 to 1,000 for wholesale and manufacturing
Terms and Available Amortization Periods	25 years fully amortized – real estate loan 20 years fully amortized – real estate loan 10 years fully amortized – equipment loan No balloon payments	Up to 25 years – real estate Up to 10 years – equipment, business acquisition 5 to 7 years – working capital All loans are fully amortized No balloon payments
Loan Structure	50% bank loan 40% CDC loan 10% borrower down payment	Loan structure negotiable; dependent on risk 10% down payment (minimum)
Loan Purchase	Purchase existing building Land acquisition and ground up construction (includes soft cost development fees) Expansion of existing building Finance building improvements Purchase equipment	Expand, acquire or start a business Purchase or construct real estate Refinance existing business debt Buy equipment Provide working capital Construct leasehold improvements Purchase inventory
Loan Program Requirements	51% owner occupancy required for existing building 60% owner occupancy required for new construction Equipment with a minimum 10 year economic life	51% owner occupancy required for existing building 60% owner occupancy required for new construction All assets financed must be used to the direct benefit of the business
Collateral	Generally, the project assets being financed are used as collateral Personal guaranties of the principal owners of 20% or more ownership are required	Collateral is the subject assets acquired by loan proceeds Requires pledge of personal residence unless bank can justify why unnecessary Personal guaranties of the principal owners of 20% or more ownership are required
Loan Fees	Fees are financed in the 504 loan Fees are negotiated for the 50% bank loan Servicing fee (lowest allowed by SBA) for CDC 504 plus a legal review fee	Fees can be financed in the 7(a) loan Fees vary with the size of the loan accompanying the 504 loan An additional .25% is charged on any loan portion above $1 million