| SBA 7(a) | SBA 504 | Conventional Bank | Seller Financing | |
|---|---|---|---|---|
| Max Amount | Up to $5M | Up to $5.5M | Varies by bank | Negotiable |
| Term Length | 10–25 years | 10–25 years | 5–10 years | 3–7 years |
| Interest Rate | Prime + 2.25–4.75% | Fixed below-market | Prime + 1–3% | 6–10% |
| Down Payment | 10–20% | 10% | 20–30% | 10–30% |
| Approval Time | 60–90 days | 90–120 days | 30–45 days | Days to weeks |
| Best For | Most small business acquisitions under $5M | Acquisitions with significant real estate or equipment | Strong borrowers who need faster closing or don't qualify for SBA | Quick closes, creative deal structures, or when bank financing falls short |
DETAILED BREAKDOWN
SBA 7(a)
Most small business acquisitions under $5M
PROS
- +Longest repayment terms available
- +Lowest down payment (10%)
- +Below-market interest rates
- +SBA guarantee reduces lender risk
- +Can finance goodwill and working capital
CONS
- −Slow approval process (60-90 days)
- −Heavy paperwork and documentation
- −SBA guarantee fee (2-3.75%)
- −Personal guarantee required
- −Collateral requirements
SBA 504
Acquisitions with significant real estate or equipment
PROS
- +Lowest fixed rates available
- +10% down payment
- +Long-term fixed rate (no rate risk)
- +Higher loan limits than 7(a)
- +No balloon payments
CONS
- −Real estate or equipment only — no goodwill
- −Slowest approval process
- −Two loans (bank + CDC) = more complexity
- −Cannot finance working capital
- −Occupancy requirements for real estate
Conventional Bank
Strong borrowers who need faster closing or don't qualify for SBA
PROS
- +Faster approval and closing
- +More flexible terms and structure
- +No SBA guarantee fee
- +Simpler documentation
- +Relationship-based lending
CONS
- −Higher down payment required (20-30%)
- −Shorter repayment terms (5-10 years)
- −Higher monthly payments
- −Stricter credit requirements
- −May require more collateral
Seller Financing
Quick closes, creative deal structures, or when bank financing falls short
PROS
- +Fastest path to close
- +Most flexible terms (everything negotiable)
- +Seller has skin in the game during transition
- +No bank qualification required
- +Can bridge gaps in SBA financing
CONS
- −Higher interest rates than SBA/bank
- −Shorter repayment terms
- −Seller may not offer it
- −Less standard — needs good legal docs
- −Balloon payments common
THE REAL PLAYBOOK
“Most first-time buyers use SBA 7(a) — it's purpose-built for this. Get pre-qualified before you make offers. The #1 deal-killer is running out of time on financing after you've already spent $10K on lawyers and due diligence. The smart play: 80% SBA + 10-15% seller note + 5-10% cash down. Seller financing shows the seller believes in the business post-sale.”