Commercial Real Estate vs. SBA Loans: Compare Business Funding
Conventional CRE loans vs. SBA 504 and 7(a) — compare down payments, rates, and timelines for purchasing commercial property.
Commercial Real Estate Loan: Commercial real estate loans finance the purchase, renovation, or refinance of income-producing or owner-occupied commercial property. SBA Loan: SBA 7(a) and 504 loans are government-backed programs offering some of the lowest rates and longest terms available for qualifying small businesses.
Commercial Real Estate Loan vs. SBA Loan — side by side
| Commercial Real Estate Loan | SBA Loan | |
|---|---|---|
| Typical amount | $250,000 – $25,000,000 | $50,000 – $5,000,000 |
| Typical term | 5 – 30 years | 5 – 25 years |
| Rate | 6% – 12% APR | Prime + 2.25% – Prime + 4.75% |
| Minimum time in business | 2 years | 2 years |
| Minimum credit score | 650+ | 650+ |
Which is right for your business?
- Commercial Real Estate Loan tends to fit best when you need purchase or renovation.
- SBA Loan tends to fit best when you need business acquisition or real estate purchase.
Frequently asked questions
What is the SBA 504 program?
SBA 504 splits financing between a conventional bank (50%), a Certified Development Company with an SBA-guaranteed debenture (40%), and the borrower's 10% down. The CDC portion carries a fixed long-term rate and a 20 or 25-year term.
Can I use SBA 7(a) instead of 504 for real estate?
Yes — SBA 7(a) can fund real estate up to $5M but uses a variable rate (prime + spread) vs. the 504's fixed CDC rate. The 504 is usually preferred for pure real estate; the 7(a) is better when working capital or equipment is bundled in.
