Which SBA loan is right for you?

Wondering what the difference is between an SBA 504 and an SBA 7(a) and which might be right for your small business? Look to a top local lender for answers.

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SBA 504 Loan vs. SBA 7(a): Which is right for your small business?

When growing a small business, funding is often one of the first challenges owners face. With multiple types of financing available, it can be daunting to assess which type of loan suits your business needs. Fremont Bank is a top SBA lender and here to support small business growth by helping leaders navigate the process of choosing the right financing. One of the first steps in this process is learning about the SBA loan options available.

What is the SBA?

SBA, or the Small Business Administration, is the federal agency that helps small business owners get access to conventional loans guaranteed by the government. 

Unlike traditional business financing, SBA loans benefit small businesses by offering low down payments, longer terms, and the ability to finance closing costs, working capital, and other project costs into one loan.

Types of SBA loans available

As you’ve set out to explore which type of SBA loan may be right for your business, you’ve probably heard of two of the more popular loans — SBA 504 and SBA 7(a). 

As a Top SBA Lender in the San Francisco Bay Area and authority on SBA lending, Fremont Bank has laid out the key differences between SBA 504 and SBA 7(a) to help you make the right choice for your business.

SBA 504 loan vs. SBA 7(a) loan at-a-glance comparison

SBA 504 loan
(Commercial real estate & equipment)
90% fixed-rate

SBA 7(a) loan
(General purpose)

Loan size

Minimum  — $125,000
Maximum — $20 million+

Minimum — $50,000
Maximum — $5 million

Interest rate


Predominantly variable;
some fixed-rate options


25 years — real estate
20 years — real estate
10 years — equipment

Up to 25 years — real estate
Up to 10 years — business acquisition, equipment
5 to 7 years — working capital
Weighted average for mixed-use requests

Down payment

10% borrower

Minimum 10% borrower (often more)

How Are SBA loans different?

One of the key differences between the SBA 504 and SBA 7(a) loan stems from the loans’ intended use. 

An SBA 504 loan is commercial real estate financing for expenses like the purchase of land or buildings, improvements to facilities, equipment, or ground-up construction. 

The SBA 7(a) loan can be seen as more general purpose, with funds being used to buy a business or obtain working capital. The common confusion between these two types of loans often arises when borrowers look to finance real estate and are offered only the SBA 7(a).

The SBA loan program you’ll want to apply for depends on the size, age, and goals of your business.

[Fremont Bank] fully understood us, understood our company — what we’re going through — and was ready to really help us out and take us to the next level.

Brad Johnston

Why trust Fremont Bank with your SBA loan?

With over 50 years of lending experience, we’re the Bay Area’s only independent, locally owned full-service bank. We’re also consistently ranked a top SBA lender in the Bay Area. Add that all up, and we’re a smart choice for an SBA loan.

Numbers aside, we understand how important a thriving small business scene is to the communities we serve. Local bankers aren’t just in it because we have unique expertise and insights into the small businesses around us – we’re in it because we all thrive together as a small business ecosystem. Fremont Bank SBA specialists are here to help.

Want to learn more about the many kinds of business loans available? We can help with that too.