Major Differences Between 7(a) and 504 Loans

Use Of Funds

To purchase real estate and/or business assets, working capital, business acquisition, partner buyout, refinance.

To purchase or construct owner-occupied commercial real estate or equipment.

Max. Loan Amount

$5 Million

$20+ Million

Structure

One bank loan

• Bank Loan
• CDC Loan

Required Injection

Minimum of 10%

• Existing Business - 10%
• Start-Up or Special-Use Property - 15% 
• Start-Up & Special-Use Property - 20% 

Interest Rate

Maximum of 2.75% above Wall Street journal Prime, floating

Fixed rates determined by the Lender and CDC

Term

Up to 25 years

Real Estate

• Lender Loan - up to 25 years
• CDC Loan - 20-25 years

• Lender and CDC Loans - 10 years

Prepayment Penalty

Declining 3 Year Prepayment Penalty

Declining 10 Year Prepayment Penalty

Collateral

• Subject property
• Additional collateral may be required by the SBA

• Lender Loan: 1st mortgage on subject property
• CDC Loan: 2nd mortgage on subject property

Processing Fees

Based on loan amount; between 2.00% - 3.75%

• SBA Guaranty Fee: 0.50%
• CDC Processing Fee: 1.50%
• Funding Fee: 0.25%
• Bond Broker Fee: 0.40%