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SBA 504 vs 7(a) calculator: compare the payment, the cash down and the fees
Both programs finance buildings and equipment. They split the money, the fees and the interest-rate risk in very different ways. Put your project in and see the two side by side.
504 structure and fees: 13 CFR 120.910 and 120.971, SBA Information Notice 5000-881796 for loans approved October 1, 2026 through September 30, 2027, and the pricing model in SOP 50 10 8.1. The debenture payment is a level payment at the effective rate you enter, which is how development companies quote it; the real payment steps down slightly every five years. 7(a) fee: Information Notice 5000-881797, added to the loan. Rate benchmarks for 7(a): our analysis of loans approved July 1, 2025 to June 30, 2026. Both columns assume rates never change. Bank fees, appraisals and closing costs outside the debenture are not included. Nothing you type leaves your browser.
Two ways to finance the same building
A 7(a) loan is one loan from one lender, with SBA guaranteeing most of it. It can be as large as $5 million and can pay for nearly anything a business needs, working capital included.
A 504 project has three parts.
- A bank or other lender provides at least half and holds the first lien. SBA does not guarantee this loan.
- A certified development company, a nonprofit certified and regulated by SBA, provides up to 40%. It raises the money by selling a debenture that SBA guarantees.
- The business contributes the rest.
How much the business must contribute depends on two questions.
| Project | Your contribution, at least | 504 debenture, at most | Bank loan, at least |
|---|---|---|---|
| Existing business, ordinary property | 10% | 40% | 50% |
| New business (two years old or less) | 15% | 35% | 50% |
| Limited or special-purpose property | 15% | 35% | 50% |
| New business and special-purpose property | 20% | 30% | 50% |
A new business is one that has operated for two years or less when the loan is approved. SBA's list of limited or special-purpose properties includes hotels and motels, gas stations, car washes, bowling alleys, nursing homes, marinas, golf courses and wineries, among others.
504 money is for fixed assets only: land and buildings, construction and renovation, and machinery with at least ten years of useful life left. It cannot pay for working capital or inventory. A project that needs both a building and cash to operate needs a second source for the cash.
SBA limits the debenture to $5 million for each business, or $5.5 million for a project by a small manufacturer or an eligible energy project. It does not limit the bank's share. A $5 million debenture is 40% of a $12,500,000 project, which is more than twice what a single 7(a) loan can finance.
What each one costs in fees
A 7(a) loan has one fee to SBA, charged up front on the guaranteed part of the loan. The 7(a) calculator sets out the schedule.
A 504 debenture has several smaller ones.
| Fee | How much | Who receives it |
|---|---|---|
| SBA guaranty fee | 0.5% of the net debenture, once | SBA. Waived in fiscal 2027 for manufacturers, listed food supply chain businesses and rural businesses. |
| Funding fee | 0.25% of the net debenture, once | The trustee, fiscal agent and transfer agent behind the debenture sale. |
| Processing fee | Up to 1.5% of the net debenture, once | The development company. |
| Closing costs | Legal and closing expenses; up to $10,000 may be financed | The development company. |
| Underwriter's fee | 0.4% of the gross debenture, once (0.375% on a 10-year debenture) | The underwriters of the monthly sale. |
| Servicing fee | At least 0.625% a year, at most 2% | The development company. Charged on the balance as it stood at the last five-year anniversary. |
| SBA annual service fee | 0.203% a year | SBA, on the same five-year balance. Waived for the same three groups. |
| Servicing agent's fee | Set by the agent's contract with SBA | The central servicing agent that collects the payments. |
The one-time fees are added to the debenture, so the business borrows a little more than its project needs. SBA's manual works through a case.
| Step | Amount |
|---|---|
| Net debenture: 35% of a $1,000,000 project | $350,000 |
| SBA guaranty fee, 0.5% | $1,750 |
| Funding fee, 0.25% | $875 |
| Development company's processing fee, 1.5% | $5,250 |
| Closing costs | $2,500 |
| Underwriter's fee, 0.4% of the gross debenture | $1,448 |
| Rounding up to the next $1,000, returned to the borrower | $177 |
| Gross debenture: what the borrower repays | $362,000 |
In that case the fees add $12,000 to a $350,000 debenture, or 3.4%.
The yearly fees are not billed separately. They are folded into the effective rate a development company quotes. After the September 2026 sale, Growth Corp put the 25-year debenture rate at 5.41% and the effective rate, fees included, at 6.54%. The calculator asks for the effective rate because that is the number you will be given.
Those yearly fees are a percentage of the balance as it stood at the last five-year anniversary. The payment therefore steps down a little every five years. The calculator shows a level payment at the effective rate, which averages the steps out.
One more fee belongs to the bank's half. SBA charges the first-lien lender 0.5% of its loan, once. On the example below that is $5,000. SBA's rules allow the lender, the development company or the borrower to pay it, so ask who will.
The example, side by side
An established business buys a $2 million building.
| Measure | 504 | 7(a) |
|---|---|---|
| Cash you put in | $200,000 | $200,000 |
| Borrowed | $1,000,000 bank, $824,000 debenture | $1,848,125 |
| Fees inside that debt | $24,000 | $48,125 |
| Rate | 6.75% bank, 6.54% debenture | 8.75% |
| Monthly payment | $12,493 | $15,194 |
| Paid in the first 10 years | $1,499,212 | $1,823,309 |
| Still owed after 10 years | $1,420,216 | $1,520,262 |
With the same cash down, the 504 package costs $2,701 a month less than the 7(a) loan, which is $324,097 over the first ten years. It also carries less in fees: $24,000 against $48,125.
Two warnings about that result.
The bank's rate is a placeholder. The 7(a) rate in the example is real: 8.75% is the median for 7(a) loans of $1–$2 million in our data. The debenture rate is real too. The rate on the bank's half is set by the bank. The calculator starts it at the prime rate, 6.75%, only so that it has something to show. Replace it with a quote before you draw any conclusion.
The 7(a) rate will probably move. The next section explains why.
Fixed against variable
The rate on a 504 debenture is set when the debenture is sold and stays there for its whole term.
A 7(a) loan is usually different. Of the 5,867 7(a) loans with terms of 25 years or more approved in the twelve months to June 30, 2026, 84% had a variable rate. Their median starting rate was 8.5%.
If prime rose two points, the payment on the example's 7(a) loan would rise by $2,586 a month, to $17,781. The debenture payment would not change. If prime fell, the 7(a) borrower would gain and the debenture holder would not.
The bank's half of a 504 project can go either way. Ask whether its rate is fixed and for how long. Ask too when it comes due: SBA requires the bank loan to run at least 10 years alongside a 20- or 25-year debenture, and at least 7 alongside a 10-year one. A bank loan that falls due before it is paid off ends in a balloon payment that has to be refinanced.
When 7(a) is the better tool
- The project needs working capital. A 7(a) loan can include it. A 504 loan cannot.
- You are buying a business, not just its building. Goodwill and inventory are not fixed assets.
- You can put in less cash. SBA sets a 10% minimum on 7(a) loans to start-ups and has separate rules for buying a business. Otherwise the 7(a) down payment is the lender's call. On a 504 project it is never under 10%.
- You may pay the loan off early. On a 7(a) loan with a term of 15 years or more, SBA charges a fee only if you prepay more than 25% of the balance in one of the first three years: 5%, 3%, then 1% of the amount prepaid. A 504 debenture carries its own prepayment fee, set out in the debenture. Ask the development company for the schedule before you sign.
Fee relief in fiscal 2027
For loans approved from October 1, 2026 through September 30, 2027, SBA waives fees for three groups: manufacturers, businesses in the food supply chain industries it lists, and businesses located in rural areas.
The relief is not the same size in the two programs.
- On a 504 loan, SBA waives both its guaranty fee and its annual service fee, and the notice sets no ceiling on the size of the loan.
- On a 7(a) loan, SBA waives its upfront fee only on loans of $700,000 or less.
The example's 7(a) loan is $1,800,000, so it would get no relief. Its 504 package would. After the September sale the same development company listed a separate manufacturer's rate of 6.3%. If that applies to a 25-year debenture, where its standard rate was 6.54%, the example's payment falls by $150 a month.
What the calculator leaves out
- Costs outside the two loans. Appraisals, environmental reports, title work and the bank's own fees.
- The months before the debenture is sold. Debentures are sold once a month. Until then an interim lender carries the development company's share.
- Eligibility. Each program has conditions the calculator cannot check. SBA describes 504 loans as financing for fixed assets that promote business growth and job creation; a development company can tell you whether your project qualifies.
- Whether the loan can be repaid. A project of this kind must show cash flow of at least 1.15 times its yearly debt payments under either program. Check yours.
We have not yet analyzed SBA's file of 504 loans. Everything on this page about 504 comes from SBA's rules and from one development company's published rates, not from loan records.
This page is general information. It is not an offer of credit, and we are not a lender.
Sources
- Information Notice 5000-881796, 504 Fees for Fiscal Year 2027, U.S. Small Business Administration. Published September 3, 2026. Upfront guaranty fee, annual service fee and the fee waiver for manufacturers, food supply chain and rural businesses. Checked October 6, 2026.
- SOP 50 10 8.1, Lender and Development Company Loan Programs, U.S. Small Business Administration. Effective October 1, 2026. 504 fee table, borrower's contribution, loan limits, maturities, third-party loan rules and the debenture pricing model (Section A, Ch. 4; Section C, Chs. 1 and 3); definition of a new business; 7(a) prepayment fee. Checked October 6, 2026.
- 13 CFR 120.971, Allowable fees paid by Borrower, Electronic Code of Federal Regulations. Servicing fee range, and the rule that ongoing fees are charged on the balance as determined at five-year anniversaries. Current as of October 2, 2026. Checked October 6, 2026.
- 504 loans, U.S. Small Business Administration. What a 504 loan may and may not be used for. Checked October 6, 2026.
- SBA 504 Rate Pricing, Growth Corp, a certified development company. Debenture rates and effective rates from the September 2026 sale. These pre-fill the calculator; they are one development company's published figures. Checked October 6, 2026.
- Information Notice 5000-881797, 7(a) Fees Effective October 1, 2026 for Fiscal Year 2027, U.S. Small Business Administration. Upfront guaranty fee on the 7(a) side of the comparison. Checked October 5, 2026.
- 7(a) & 504 FOIA dataset, U.S. Small Business Administration. Source of the 7(a) rate benchmarks and of the share of long-term 7(a) loans with variable rates; records as of June 30, 2026. Checked October 5, 2026.
Corrections and updates
- First published, with fiscal 2027 fees and rates from the September 2026 debenture sale.