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SBA 7a Vs 504 Loan Programs – How To Decide Which Loan Program Is Best For You And Your Business?

November 2, 2017

As a small business owner who is ready to purchase a commercial property for your business, you might find yourself faced with a seemingly difficult choice between the SBA 7a loan program, or the SBA 504 loan program.

As you make your decision about the sba 7a vs 504 loan option, chances are you are receiving conflicting advice and information. In fact, its entirely possible that your lender might be offering both of these commercial mortgage programs to you – and they might even try to convince you that the SBA 7a loan is the better option.

In reality, the sba 7a vs 504 debate isn’t even a contest. The SBA 504 commercial mortgage program is by far the better commercial mortgage program for a small business owner, for a number of reasons. If your lender tells you that a SBA 7a loan is the better option, they are likely doing so because they have an agenda that doesn’t match your own.

When comparing the sba 7a vs 504 loan programs, the biggest difference you’ll find is that the SBA 504 program was actually designed for use by small business owners to finance commercial real estate properties that they buy for their businesses, while the SBA 7a program was not.

The SBA 7a program was originally intended for use in financing business acquisitions, FF&E, working capital loans, and other high-risk loans. However, because of a few unique qualities found in the SBA 7(a) loan program that benefit the lender (and NOT you), greedy bankers began using this program to finance real estate properties, even though it is a dangerous loan for the borrower.

The SBA 7a loan program can be very dangerous for you and your business, while the SBA 504 loan program is very beneficial.

Some of the key advantages of the SBA 504 loan program include:

1. Long-term fixed rates – with fixed rates up to 20 years

2. Ability to finance up to 90% of the total project costs

3. Ability to include closing costs and loan fees in the financing

These are just a few of the many advantages made possible through the SBA 504 program.

And unfortunately, there are several drawbacks to an SBA 7a loan.

If you are currently deciding between the sba 7a vs 504 loan programs, then it is absolutely vital that you educate yourself about the dangers inherent to the SBA 7a commercial mortgage program, and why the 504 commercial mortgage program is a much better and SAFER loan option for you and your business.

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