Which SBA programs finance commercial real estate in 2026?
If your business wants to buy, build, expand or refinance the building it runs from, SBA has more than one way to pay for it. Here’s which program fits which deal in 2026, what SBA checks on the property, and how Five West puts the file together.
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Which SBA programs finance a commercial building?
Four main SBA options pay for real estate your own business uses:
- SBA 504, the main real estate program: long-term financing, fixed-rate on SBA’s piece, for land, buildings, construction, renovation and long-life machinery.
- 7(a) Standard and 7(a) Small, SBA’s all-purpose loan. Up to $350,000, it’s a 7(a) Small loan.
- SBA Express, a simpler 7(a) of up to $500,000 (from $150,000 with us) that can also buy, build or refinance owner-occupied real estate.
- 504 debt refinancing for an existing building or equipment loan.
We can access every SBA loan program, and 7(a) and 504 are the ones most businesses use. Tell us what the building is for, and we’ll match the file to the program most likely to approve it. That’s how Five West’s SBA loans start.
Does your business have to occupy the building?
Yes. Your business has to occupy at least 51% of an existing building and can lease the other 49%. New construction is 60%: up to 20% can be leased long term, and another 20% temporarily if you’ll use some of it within 3 years and all of it within 10.
SBA won’t finance investment property: a building bought mainly to rent out, resell or hold, apartment buildings, or a business whose main line is owning and leasing real estate.
Owning the building in its own LLC. SBA allows this on 7(a) and 504, calling the LLC an Eligible Passive Company (EPC) and your business the Operating Company (OC). The main conditions:
- The LLC leases 100% of the building to your operating business, which has to occupy the 51% or 60% itself.
- The written lease sits behind SBA’s lien and runs at least as long as the loan, with rent capped at the loan payment plus holding costs like taxes and insurance.
- Your operating business signs as guarantor or co-borrower, and every owner of 20% or more of either company guarantees the loan.
Have your attorney set up the entity and lease, and your CPA review the tax side. Our SBA application asks about occupancy early, so you’ll know right away if it’s a problem.
How does an SBA 504 loan work?
A 504 project is usually split three ways: about 50% from a senior lender with a first lien, up to 40% from the SBA-backed 504 loan with a second lien, and at least 10% from you. Your share rises to 15% if the business is two years old or less (a purchase by new owners can count) or the building is special-purpose, and to 20% if both. SBA’s special-purpose list includes medical facilities, hotels, gas stations and car washes, and the 504 side checks each building.
504 pays for land, site work, buying, building or renovating, machinery with a 10-year-plus useful life, and costs like appraisals and title insurance, but not working capital, inventory or goodwill. Each project also needs a jobs goal (one job created or kept per $95,000 of SBA’s piece, $150,000 for small manufacturers and qualifying energy projects) or a public-policy goal like rural development.
SBA’s piece tops out at $5 million per business, or $5.5 million per project for qualifying energy projects and small manufacturers with all U.S. production (our SBA guide for manufacturers explains). Since July 4, 2026, a 7(a) balance no longer reduces that limit, and for loans approved through September 30, 2027, SBA waives its own 504 upfront guaranty fee and annual service fee for manufacturers, rural businesses and food supply chain businesses on SBA’s list.
If the project is mostly the building, I’d look at our 504 loans first.
When does a 7(a) loan fit better than 504?
When the building is only part of what you’re paying for. A 7(a) can carry real estate, equipment, working capital and refinancing in one loan, and if at least 51% goes to real estate, the whole loan can run up to 25 years.
Buying a business with its building is the clearest case: 504 can take the building if you buy the whole business and the seller leaves, but goodwill needs another loan, which may be a 7(a). On a 7(a) purchase, though, the real estate share can run up to 25 years, while the business part generally pays off over 10. We run 7(a) and 504 against your deal and show you the numbers.
| For a building | SBA 504 | SBA 7(a) |
|---|---|---|
| Down payment | At least 10%. 15% for a business two years old or less or a special-purpose building; 20% if both. | Set by the lender for an established business. Startups: at least 10% of the project. Business purchases: SBA’s purchase rules, which start at 10%. |
| What it pays for | Land, buildings, construction, renovation, long-life machinery, project costs and qualifying refinancing. | The same, plus other equipment, working capital or a business purchase. |
| Occupancy | 51% of an existing building, 60% of new construction. | The same. |
| Maximum size | SBA’s piece: $5 million per business, or $5.5 million per project for small manufacturers and qualifying energy projects. | $5 million. With Five West, $150,000 to $5 million. |
| Terms | 10, 20 or 25 years on SBA’s piece. The senior lender’s loan can be shorter. | Up to 25 years on real estate, plus construction time. |
| Structure | A senior lender’s first-lien loan for about half, plus the SBA-backed 504 loan for up to 40%. | One loan, partly guaranteed by SBA. |
| Best for | Projects that are mostly real estate or long-life equipment. | A building bought with a business, or a project that mixes uses. |
SBA columns: SOP 50 10 8.1 and 13 CFR part 120. Five West’s 7(a) range is our own guideline.
Can SBA loans pay for construction, renovation or land?
Yes, when the land and the work are for your own business. Both 7(a) and 504 can buy land, pay for site work like grading and parking lots, build new, and expand or renovate, but neither funds extra land the project doesn’t need now.
On 504, an interim loan, often from the senior lender, covers construction, and SBA’s piece funds once the work is done and your business has moved in. A 7(a) with more than $350,000 of construction needs a fixed-price contract, bonds, builder’s risk, inspections and lien waivers, and neither the lender nor SBA has to raise the loan for overruns. A building on the National Register of Historic Places, or eligible for it, needs SBA to review the planned changes first.
If the equipment for the new space can’t wait, our equipment finance funds 24 to 48 hours after signing on standard deals.
Can an SBA loan refinance a commercial mortgage?
Yes. 504 has two refinance options, and 7(a) has its own rules:
- 504 with an expansion. If you’re also buying, building or improving fixed assets, 504 can refinance debt up to the expansion’s cost. The old debt has to have gone at least 75% to fixed assets, be secured by fixed assets and be paid on time for the past year. The new payment has to be lower, on better terms.
- 504 without an expansion. The business needs two full years of operations. The old loan must have gone at least 75% to fixed assets and been fully funded and secured for at least 6 months. The new loan can reach 90% of the appraised value, with your equity at least 10% (15% on a special-purpose building), and can cover some business bills that are unpaid or due within 18 months.
- 7(a). The debt has to be current for the last 12 months (or its whole life, if younger), and the new payment generally at least 10% lower.
If your debt doesn’t fit yet, we’ll say so and line up what fits today. Need cash sooner? With an equipment leaseback, you pledge machinery you own free and clear, get a lump sum against its value and keep using it, and the lien is released at payoff. It needs two years in business and funds 2 to 5 business days after signing.
What does an SBA real estate file need?
On top of the usual SBA paperwork, a building brings:
- Appraisal by an independent state-licensed or state-certified appraiser (state-certified above $1 million), dated within 12 months. 504 requires one above $500,000; a 7(a) purchase should plan on one at any size.
- Environmental review on every commercial property securing the loan. Past uses like a gas station or auto repair shop can call for a Phase I at any loan size, then a Phase II if problems turn up. On-site dry cleaning, past or present, needs both.
- Insurance: property (hazard) coverage for full replacement cost, flood insurance in a FEMA special flood hazard area, and builder’s risk during construction.
- Title: the lender takes a lien on the building, and on 504, title insurance is a cost the loan can pay.
Coming from commercial insurance operations, I’d start the insurance quotes while the appraisal is underway, not the week you close.
SBA’s basic tests still apply (for-profit, small, owned 100% by U.S. citizens or nationals who live in the U.S., enough cash flow, guarantees from 20% owners), and our full guide to the 2026 SBA 7(a) requirements covers each. SBA sets no minimum credit score, but the lenders that underwrite SBA loans do, and that’s usually 650 or higher. Steady cash flow matters as much as the score.
A complete file usually closes in 45 to 90 days, and it can take longer depending on the file. You’ll get one checklist up front, and here’s how to send financials cleanly.
Why use Five West for an SBA real estate loan?
A building adds appraisal, environmental, insurance and title work, and we line it up with the rest of the file:
- Quick, straight answers. Applying starts with a soft credit inquiry, and most files get a first response within 1 to 2 business hours. If yours isn’t SBA-ready, we’ll say so.
- The right program. We can place any current SBA program, package the file and submit it through the one most likely to approve your deal.
- One contact. A dedicated funding professional manages your deal from application to funding, and the team averages about 10 years of experience.
- Managed to closing. We quarterback conditions, appraisals and documentation through to funding, and you can check your status online.
Our 7(a) loans run $150,000 to $5 million over 10 to 25 years, and our 504 loans run 10, 20 or 25 years.
Frequently asked questions
Can you use an SBA loan to buy an investment or rental property?
No. SBA finances property your own business occupies. Its rules bar buildings bought mainly to rent out, resell or hold as an investment, apartment buildings, and businesses whose main line is owning and leasing real estate. You can still lease out part of a building you occupy: up to 49% of an existing one, or up to 40% of a new one, with half of that only until your business grows into it.
How much is the down payment on an SBA commercial real estate loan?
On a 504 loan, at least 10% of the project, or 15% if the business is two years old or less or the building is special-purpose, and 20% if both apply. On a 7(a), SBA lets the lender set the down payment when an established business buys its own building. A startup puts in at least 10% of the project. A building bought with a business follows SBA’s business purchase rules, which start at 10%.
Can my LLC own the building and lease it to my business?
Yes. SBA calls the LLC an Eligible Passive Company and allows it on 7(a) and 504 loans. The LLC leases 100% of the building to your operating business under a written lease at least as long as the loan, your operating business occupies the required 51% or 60%, and owners of 20% or more of either company guarantee the loan. The operating business also signs as a guarantor or co-borrower.
Can an SBA loan buy land?
Yes, when the land is part of a project for your own business, like a site you’ll build on now. Both 504 and 7(a) can pay for land and site work. SBA won’t fund extra land the project doesn’t need now, or land held for future development, sale or investment.
Is 504 or 7(a) better for buying a building?
It depends on what else is in the deal. If it’s mostly the building and long-life equipment, 504 usually fits, with at least 10% down (15% for a business two years old or less or a special-purpose building, 20% if both). If the building comes with a business purchase, equipment or working capital you want in one loan, 7(a) is often the better match. Five West runs both against your deal and shows you the numbers.
Can I use an SBA loan for a mixed-use building?
Yes, if your business occupies at least 51% of the whole building, or 60% if it’s new construction. In a building zoned for both commercial and residential use, you can live in the residential units or rent them out. Living space counts toward the business’s share only when the business needs a resident owner or manager on site, so plan on reaching 51% without it.
How long are SBA commercial real estate loan terms?
504 loans run 10, 20 or 25 years. A 7(a) can run up to 25 years on real estate, plus construction or renovation time, and a loan with at least 51% going to real estate can run 25 years in full, except on a business purchase. With Five West, 7(a) terms are typically 10 years and up to 25 for real estate.
Have a building in mind?
One short application with a soft credit inquiry gets it going. Tell us what the building is for, and we’ll tell you whether 504, 7(a) or both fit, with one checklist up front.
This article is general information about SBA loans for commercial real estate, not legal, tax or accounting advice or a commitment to finance. SBA can change these rules with a new SOP version or notice, so check SBA.gov for the current requirements before you rely on them. All financing is subject to credit approval and underwriting.