Small Business Administration (SBA) loans are popular among small business owners looking for financing. The two most common types of SBA loans are the 7a loan and the 504 loan. Knowing the differences between these two loans can help you make an informed decision about which type of loan is right for you. Let’s take a look at some key differences between SBA Loan 7a and 504 loans. 

SBA Loan 7a 

The SBA Loan 7a, also known as a “general purpose” loan, is used to finance a wide variety of business needs such as working capital, equipment purchases, or real estate purchases. It is designed to provide long-term financing and can be used to purchase land, buildings, or machinery. It also offers lower interest rates than other types of financing and has longer repayment terms than traditional bank loans. The maximum loan amount for this program is $5 million and requires a personal guarantee from all owners with 20% or more ownership in the company. 

504 Loan 

The 504 loan program was created by the U.S. Small Business Administration (SBA) to help small businesses grow by providing long-term financing for fixed assets such as land, buildings, or equipment. This type of loan does not require a personal guarantee from any owners with 20% or more ownership in the company but does require collateral in order to secure the loan funds. Additionally, this type of loan has lower down payment requirements than other types of commercial loans because it is partially guaranteed by the government. The maximum amount that can be borrowed through this program is $5 million - but only $1 million may be used for working capital expenses such as inventory and accounts receivable management costs.

Small business owners are faced with the challenge of finding the right loan that works for their needs. The SBA loan calculator can make this process simpler and easier by quickly calculating monthly payment and cost of the loan while giving business owners two different loan program choices to consider, including the SBA 504 and SBA 7a loans. With one simple online search business owners can be quickly on their way to finding the perfect loan for their business.

Whether you’re looking for working capital or need funds for purchasing real estate or equipment, there are benefits to both SBA Loan 7a and 504 loans depending on your situation and needs as a business owner. Be sure to discuss your options with an experienced financial advisor to ensure you get the best possible outcome when applying for an SBA loan so that you can capitalize on all available resources when growing your small business!