SBA 504 and SBA 7(a) - Axis Financial

SBA 504 program is for the acquisition, construction and/or renovation of owner-occupied commercial land and buildings as well as the acquisition of long-lived (20 year or longer) machinery and equipment. SBA 7(a) loans, on the other hand, can be used for any business purpose – starting a business or acquiring one; business expansion/renovation; new construction, purchase land or buildings; purchase equipment, fixtures, working capital; refinance debt; inventory and more.

	504 Loan	7(a) Loan
Description	This program is for the acquisition, construction and/or renovation of owner-occupied commercial land and buildings as well as the acquisition of long-lived (20 years or longer) machinery and equipment. This program provides long-term, fixed rate (typically below market) financing to businesses that will retain and/or create jobs.	This program is the “common” SBA loan that can be used for any business purpose – starting a business or acquiring one; business expansion/renovation; new construction, purchase land or buildings; purchase equipment, fixtures, lease-hold improvements; working capital; refinance debt; seasonal line of credit, inventory and more.
How it works	These loans are made by private lenders utilizing partial guarantees from the SBA. An approved lender makes the first lien loan and CDCs are utilized to issue the secondary financing.	The SBA does not generally make direct loans. Rather, they guarantee loans submitted and made by financial institutions, generally banks.
Who Qualifies	Business must be for-profit and a “small business” as defined by SBA size standards	Business must be for-profit and a “small business” as defined by SBA size standards
Loan Amounts	No Project Maximum. SBA portion is up to $5,000,000 ($5.5 million for energy savings and small manufacturers)	The SBA guarantees loans up to $5,000,000 with a maximum guaranteed loan amount of $3,750,000
Participation Levels	Private Lender: Up to 50% of total project cost SBA Guaranty: Up to 40% of total project cost (not to exceed SBA maximum) Owner’s Equity: 10% of total project cost (no more than 20% as regulated by the SBA)	The minimum contribution is normally 10% of project request Up to 85% financing depending on the length of time in business and equity investment in the business
Loan Repayment	Private Lender: 10-year balloon, based on a 20- or 25- year amortization SBA Guaranty: 10 to 20 years as determined by the SBA	Maturity generally varies from 7 to 25 years depending on the purpose for the loan
Interest Rate	Private Lender: Current prime rate plus percentage points (variable or fixed) SBA Guaranty: Set monthly at an increment above the 10- year U.S. Treasury issues. (fixed)	The rate is determined by the bank making the loan, and is within the parameters established by the SBA. The SBA’s guaranteed loan program interest rates are generally current prime rates plus fixed percentage points.
Benefits to Borrowers	Low down payment requirements (10% to 20%) Long-term fixed interest rates, typically at below market rates, on the secondary financing More affordable monthly payments Fully amortizing loans – no balloon payments on the secondary financing	Low down payment requirements Long-term financing More affordable monthly payments No prepayment penalty on loans with a term of less than 15 years

The above information is provided to give a better understanding of the SBA loan programs. The information is general and each loan application is reviewed individually.