If you’re looking to invest in a business, you may have heard of the Small Business Administration (SBA) loan options. These loans are designed to help small business owners access capital and grow their business. But which loan should you choose? Here, we will be comparing SBA Loan 7a and 504 so that you can make an informed decision.
What is an SBA Loan 7a?
The SBA Loan 7a program is a loan guarantee program backed by the U.S. government that helps qualifying businesses acquire financing from private lenders such as banks and credit unions. This type of loan is intended for businesses that need long-term financing for up to 25 years for fixed assets such as real estate or equipment, and up to seven years for working capital such as inventory or accounts receivable. The maximum amount available through the SBA Loan 7a program is $5 million and there are no collateral requirements on loans under $25,000. Borrowers must typically provide 10%-20% equity injection into the project as well as pay origination fees ranging from 1%-3% of the total loan amount.
What is an SBA Loan 504?
The SBA Loan 504 program provides long-term financing to small businesses with up to 90% of the total project cost financed by a Certified Development Company (CDC). This type of loan requires borrowers to provide 10%-20% down payment depending on the project size but does not require any collateral for loans under $150,000. This type of loan has a fixed interest rate over a 20-year term and can be used for real estate purchases or construction projects, machinery/equipment purchases, debt refinancing or acquisition costs. The maximum amount available through this program is $5 million with origination fees ranging from 0%-3%.
Our SBA Loan comparison calculator makes it easy to compare these two types of loans side-by-side so you can decide which one best suits your needs. Simply input your desired loan amount and term length into the calculator and our algorithm will calculate details on each type of loan including terms, cost, repayment etc based on your situation—allowing you to make an informed decision about which option is right for you.
Deciding between an SBA 7a or 504 loan doesn’t have to be a difficult task—especially when using SBA 7a vs 504 Loan calculator. With just a few clicks, entrepreneurs can easily determine which type of loan will offer them better terms based on their needs—saving time, money, and hassle in the process. So if you’re considering taking out an SBA loan, give our comparison calculator a try.
As you can see, both the SBA Loan 7a and 504 programs have their own unique benefits and drawbacks depending on your investment needs. By understanding your investment goals, researching your options thoroughly, and speaking with a qualified lender or financial advisor about your specific situation, you can choose which option best meets your needs when it comes time to invest in a new business endeavor.