# What is the difference between a 504 loan and a 7(a) loan?

**Short answer:** A 504 loan finances long-term fixed assets through a bank and a Certified Development Company. A 7(a) loan comes from one lender and can also cover working capital, inventory and business purchases. Each has its own limits, rates and fees.

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Last checked: 2026-11-09

A 504 loan is built for long-term fixed assets. A 7(a) loan is a broader loan from one lender. SOP 50 10 8.1 covers both.

## Side by side

- **Who makes it.** 504: a third party lender plus a CDC. 7(a): one SBA lender.
- **Uses.** 504: major fixed assets such as land, buildings and long-term machinery and equipment, not working capital or inventory. 7(a): those assets plus working capital and inventory (Sec. A, Ch. 3, Para. A, p. 51), and a change of ownership (Sec. B, Ch. 1, Para. A, p. 117; App. 15).
- **Size.** 504: a debenture of up to $5,000,000, or $5,500,000 per project for small manufacturers and eligible energy projects. 7(a): up to $5,000,000.
- **SBA's share.** 504: a debenture guaranteed 100%. The standard structure is 50% third party lender, 40% CDC debenture, 10% borrower. 7(a): 85% on loans of $150,000 or less and 75% on larger loans.
- **Rate.** 504: fixed, set at the debenture sale. 7(a): fixed or variable, within SBA maximums. The variable maximum is Prime plus 3.0 to 6.5 percentage points, depending on loan size.
- **Term.** 504: 10, 20 or 25 years. 7(a) real estate: up to 25 years, plus any reasonable construction or renovation period.
- **Your contribution.** 504: at least 10% of the financing, 15% for a new business or limited or special purpose property, and 20% for both. 7(a): at least 10% of total project costs for a start-up. An Initial Acquisition needs 10%, which cannot be reduced or eliminated. Other changes of ownership have their own minimums (App. 15, Para. C.2.a). Otherwise the lender or SBA judges equity.
- **Job test.** 504: a job standard or another listed economic development goal (Sec. C, Ch. 1, Para. A, p. 219). The 7(a) chapters set none.

## Where they match

Occupancy rules are the same (13 CFR § 120.131).

## Using both

You can pair them, and the 7(a) loan should be approved first (Policy Notice 5000-879058; App. 16). Rates and lender terms vary, so compare the full cost of each.

## Sources

- [SOP 50 10 8.1, Sec. A, Ch. 3, Para. A (p. 51)](https://legacy.sba.gov/sites/default/files/2026-10/SOP%2050%2010%208.1%20Technical%20Policy%20Updates%20effective%20%2010.1.2026.docx)
- [SOP 50 10 8.1, Sec. B, Ch. 1, Para. A (p. 117)](https://legacy.sba.gov/sites/default/files/2026-10/SOP%2050%2010%208.1%20Technical%20Policy%20Updates%20effective%20%2010.1.2026.docx)
- [SOP 50 10 8.1, Sec. C, Ch. 1, Paras. A-D (pp. 219-241)](https://legacy.sba.gov/sites/default/files/2026-10/SOP%2050%2010%208.1%20Technical%20Policy%20Updates%20effective%20%2010.1.2026.docx)
- [SOP 50 10 8.1, App. 15, Para. C.2.a (Para. C begins p. 371)](https://legacy.sba.gov/sites/default/files/2026-10/SOP%2050%2010%208.1%20Technical%20Policy%20Updates%20effective%20%2010.1.2026.docx)
- [SOP 50 10 8.1, App. 16 (p. 387)](https://legacy.sba.gov/sites/default/files/2026-10/SOP%2050%2010%208.1%20Technical%20Policy%20Updates%20effective%20%2010.1.2026.docx)
- [SOP 50 10 8.1, App. 17 (p. 390)](https://legacy.sba.gov/sites/default/files/2026-10/SOP%2050%2010%208.1%20Technical%20Policy%20Updates%20effective%20%2010.1.2026.docx)
- [SOP 50 10 8.1, App. 18, Para. A (p. 395)](https://legacy.sba.gov/sites/default/files/2026-10/SOP%2050%2010%208.1%20Technical%20Policy%20Updates%20effective%20%2010.1.2026.docx)
- [SOP 50 10 8.1, Sec. B, Ch. 1, Para. C (p. 118)](https://legacy.sba.gov/sites/default/files/2026-10/SOP%2050%2010%208.1%20Technical%20Policy%20Updates%20effective%20%2010.1.2026.docx)
- [SBA Policy Notice 5000-879058, pp. 1-3 (effective July 4, 2026)](https://legacy.sba.gov/document/policy-notice-5000-879058-coordination-7a-504-maximum-loan-limits)
- [13 CFR § 120.131](https://www.ecfr.gov/current/title-13/section-120.131)
- [sba.gov/loans/504-loans (read November 8, 2026)](https://www.sba.gov/loans/504-loans/)
- [sba.gov/sba-lenders (read November 8, 2026)](https://www.sba.gov/sba-lenders)
- [13 CFR § 120.214(d)](https://www.ecfr.gov/current/title-13/section-120.214)