Buying Commercial Real Estate, Which loan is best for you?

Conventional Commercial Loans

Pros:

Flexible loan terms tailored to borrower strength.
No SBA fees, reducing overall costs.
Faster closing process with no government involvement.
No use restrictions on property leasing or occupancy.

Cons:

Higher down payments, typically 20%-30%.
Shorter repayment terms, often 5-20 years with potential balloon payments.
Stricter qualifications—strong credit and cash flow required.
Some loans have adjustable interest rates.

SBA 7(a) Loan for Commercial Real Estate

Pros:

Lower down payment, as low as 10%-15%.
Longer loan terms—up to 25 years.
Can finance real estate plus working capital or renovations.
Easier approval for small businesses.

Cons:

Loan cap of $5 million, limiting high-cost projects.
Higher interest rates than SBA 504 and some conventional loans.
Personal guarantee required for 20%+ owners.
SBA fees increase loan costs.

SBA 504 Loan for Commercial Real Estate

Pros:

Low 10% down payment preserves cash.
Fixed, low-interest rates on the CDC portion.
Long 25-year repayment terms.
Can finance projects up to $20 million.

Cons:

Property must be 51% owner-occupied (existing) or 60% owner-occupied (new).
Two-lender structure complicates approvals.
Funds limited to real estate and equipment—not working capital.
SBA and CDC fees apply.

Which Loan is Right for You?

Need fast, flexible financing? → Conventional loan
Buying real estate plus covering expenses? → SBA 7(a) loan
Looking for low-cost, long-term financing? → SBA 504 loan