SBA 7(a) V. SBA 504 – What's the difference?

Are you looking for small business financing in Virginia? If so, congratulations. You're about to invest in the local economy and likely put yourself on the path to financial success.

But before you can move forward with your small business plan, it’s important to choose the right loan provider. You have a few attractive options for small business financing in Virginia through the United States Small Business Administration (SBA). The SBA 504 loan and the SBA 7(a) are both great choices for small businesses.

But what’s the difference between them? We took a look at both loan types to help you decide what is right for your business.


Breaking down the SBA 504 Loan

Requirements: To work with an SBA 504 loan provider in VA, you will need to have a solid business plan for a for-profit, U.S. company and good credit. Financing is available up to $5 million.

Benefits: This loan is best for business owners looking to buy commercial real estate, heavy machinery or equipment, or property. It can also be used to build or renovate facilities.

Terms: A minimal 10 percent down payment is required. An SBA 504 loan provider in Va. can offer competitive, fixed interest rates (based on US Treasury rates) and long-term financing up to 25 years.

How to find an SBA 504 loan provider: To get approval for an SBA 504 loan in Virginia a small business owner needs to work with a certified SBA CDC in Virginia. Certified Development Companies assist small businesses and match them with the best lenders.

Breaking down the SBA 7(a) Loan

Requirements: For a standard 7(a) loan the maximum loan amount is $5 million. You will need to have a solid business plan and good credit.

Benefits: This loan is a good choice for a potential small business owner looking to purchase a business or gain working capital. Funds can be used for startup costs, repairing existing capital, refinancing existing debt, or purchasing equipment, furniture, fixtures, supplies or other materials.

Terms: Term lengths vary depending on the purpose of the loan – 7 years for working capital vs. 25 years for real estate. Interest rates are fixed or variable. Requires at least a 10% down payment but often can be more.

How to find an SBA 7(a) loan provider: Visit SBA.gov to find an approved lender.

Now that you’ve compared the top SBA loan offerings, take time to think about the best ways to move your business forward. What are your top priorities? What are the items you need help with purchasing? How long do you want to have this loan, and how important are low monthly payments to your bottom line? Preparing a clear list of goals will help you make the right decision on which loan type is right for you.

If you decide to go with an SBA 504 loan, do some research and connect with a Certified Development Company in your area to learn more.
Location: 501 Independence Pkwy # 330, Chesapeake, VA 23320, USA

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