SBA 7(a) vs. SBA 504 vs. Conventional Loans: Financing Your Florida Business Property

For many Central Florida business owners, rent is the single largest fixed cost, and buying the building can turn that cost into equity. The financing choice matters as much as the property. The three most common paths, SBA 7(a), SBA 504 and conventional commercial loans, differ in down payment, rate structure, fees and how much flexibility you get.

The three options at a glance

	SBA 7(a)	SBA 504	Conventional commercial
Maximum loan	$5 million	$5 million SBA portion, $5.5 million for qualifying manufacturing or energy projects, plus the bank's first mortgage	Set by the lender
Typical down payment	Often 10% for real estate	10%, rising to 15% for startups or special-purpose property and 20% for both	Usually 20% to 30%
Uses	Real estate, working capital, equipment, business acquisitions, refinancing	Owner-occupied real estate and major long-life equipment	Owner-occupied or investment property
Rate	Usually variable, can be fixed	Fixed rate on the SBA portion, bank portion set by the bank	Fixed or variable, often with a balloon
Term for real estate	Up to 25 years	SBA portion 10, 20 or 25 years	Often 5 to 10 years, amortized over 20 to 25

How a 504 loan is structured

A 504 loan combines three pieces: a first mortgage from a bank for about 50% of the project, a second loan from a Certified Development Company (CDC), backed by the SBA, for about 40%, and your down payment of about 10%. The CDC portion carries a long-term fixed rate, which is the main attraction when rates are elevated, as they have been this fall with 30-year mortgage rates above 7%.

Example: on a $2,000,000 building purchase, the bank might lend $1,000,000, the CDC $800,000 and the business would contribute $200,000. With a conventional loan at 25% down, the same purchase would need $500,000 in cash.

Owner-occupancy rules

Both SBA programs are designed for businesses that use the property. For an existing building, the business must occupy at least 51% of the space and can lease out the rest. For new construction, the business must occupy at least 60% initially, with plans to occupy more over time. Conventional loans have no such rule, which makes them the fit for pure investment property.

What changed for SBA borrowers in 2026

• A higher combined limit. Since July 4, 2026, a business can combine up to $5 million in 7(a) financing with up to $5 million in 504 financing, up to $10 million in total SBA-backed debt, instead of a combined $5 million cap.
• Stricter ownership eligibility. SBA updated its rules in 2026 so that, in general, all owners of an applicant business must be U.S. citizens or nationals. Eligibility rules are revised from time to time, so confirm the current requirements before you apply.
• Updated program rules. A revised SBA operating procedure, SOP 50 10 8.1, took effect October 1, 2026, folding in these changes along with updated rules for business acquisitions and changes of ownership.

Fees to budget for

SBA 7(a) loans carry an upfront guaranty fee on the guaranteed portion of the loan. For fiscal year 2027, which began October 1, 2026, the tiers for loans over 12 months are 2% for loans of $150,000 or less, 3% for loans from $150,001 to $700,000, and 3.5% on the guaranteed portion up to $1 million plus 3.75% above $1 million for larger loans, with an ongoing annual service fee of 0.55%. Some smaller loans to manufacturers and rural businesses qualify for fee relief. SBA 504 loans have their own CDC and SBA fees, typically financed into the debenture.

In Florida, remember documentary stamp tax and intangible tax on new mortgage debt, along with appraisal, environmental review, title and legal costs.

Which option fits your business?

• Choose SBA 504 when you are buying or building owner-occupied real estate, want to keep cash in the business and value a long-term fixed rate.
• Choose SBA 7(a) when the purchase includes more than real estate, such as buying an existing business with its building, adding working capital or refinancing other debt.
• Choose conventional when the property is mainly an investment, you have the larger down payment, or you want a faster process with fewer program requirements.

Preparing your application

1. Three years of business and personal tax returns, plus year-to-date financial statements
2. A schedule of business debts and a personal financial statement for each owner
3. The purchase contract, property details and any leases for space you will not occupy
4. Projections and a short business plan if the move changes your operations
5. Proof of the down payment and post-closing liquidity

Frequently Asked Questions

What is the down payment on an SBA 504 loan?

Usually 10% of the project cost. It rises to 15% for startups or special-purpose properties and to 20% when both apply.

Can I use an SBA loan to buy an investment property?

Generally no. SBA real estate loans require the business to occupy at least 51% of an existing building or 60% of new construction. Pure investment property is usually financed with conventional commercial or DSCR loans.

What is the maximum SBA loan amount in 2026?

SBA 7(a) loans go up to $5 million, and the SBA portion of a 504 loan goes up to $5 million, or $5.5 million for qualifying manufacturing and energy projects. Since July 4, 2026, a borrower can combine both programs for up to $10 million.

Is SBA 7(a) or 504 better for buying a building?

For owner-occupied real estate alone, 504 often wins on down payment and long-term fixed rate. 7(a) is more flexible when the deal also includes working capital, equipment or buying an existing business.