How does SBA set the term when one loan has several uses?
Short answer
The term may be a blended maturity, or up to 25 years if 51% or more of the proceeds are for real estate. SOP 50 10 8.1, Appendix 17, Para. A.5 sets this. Loans that finance a change of ownership follow Appendix 15 instead.
SOP 50 10 8.1, Appendix 17, Para. A.5 (p. 390) covers loans used for more than one purpose. That includes land and building, working capitalMoney for day-to-day costs such as payroll, rent and inventory. Full definition, and machinery and equipment, or refinancing any of these. SBA's technical update notice of September 25, 2026 restates the rule (p. 3).
Two routes
- Blended maturity. The term reflects the mix of uses.
- 51% real estate. If 51% or more of proceeds are for real estate, the maximum may be up to 25 years.
A blended example
Appendix 17 gives no formula. Appendix 15 uses a weighted average for business purchases, rounded to the nearest full year. Applied to a $1,000,000 loan with $400,000 for real estate and $600,000 for working capital:
- 40% at 25 years adds 10 years.
- 60% at 10 years adds 6 years.
- The blended term is 16 years.
Ask your lender how it calculates its blend.
Why the 51% line matters
At 51% real estate, the same $1,000,000 loan can have a term of up to 25 years, which lowers the payment. The term still must be the shortest appropriate term based on the use of proceeds and the borrower's ability to repay.
The 51% option does not apply to any loan financing a change of ownership.
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