SBA 7(a) Loans for Commercial Real Estate

SBA calls 7(a) its primary business loan program. SBA provides a guarantee to the lender, and you deal with the lender, not SBA. As the 7(a) page puts it, you will always work directly with your lender.

SBA's page lists these allowed uses: acquiring, refinancing or improving real estate and buildings; short- and long-term working capital; refinancing current business debt; machinery and equipment; furniture and supplies; changes of ownership; and combinations of these. That flexibility is the program's main distinction for a building buyer.

The figures below come from SBA's page and its operating procedure, SOP 50 10 8.1, effective October 1, 2026, as read in November 2026. They can change, including through SBA notices issued for a particular fiscal year, so ask your lender what applies on the day you apply.

• Loan limit: $5 million on SBA's page and in the SOP for a Standard 7(a) loan. If you have affiliates, the limits apply to the group as a single business.
• SBA guaranty: up to 75 percent on loans over $150,000, with a maximum guaranty of $3,750,000 to any one business and its affiliates. Existing 7(a) and 504 loans count.
• Maturity: real estate loans may not exceed 25 years, plus time reasonably needed for construction or renovation.
• Mixed use of proceeds: if 51 percent or more of the proceeds go to real estate, the maximum maturity may be up to 25 years, except for change of ownership loans, which follow their own rules.
• Rate: for loans over $350,000, a variable rate cannot exceed prime or SBA's optional peg rate plus 3 percent. Fixed-rate maximums are published separately by SBA.
• Personal guaranty: any individual owning 20 percent or more of the applicant must give an unlimited full guaranty.

The guarantee protects the lender and not you. If the loan goes bad, you and your guarantors still owe the debt.

7(a) money is not for a building you plan to rent out. Under 13 CFR 120.131, which covers both 7(a) and 504 financing, your company must permanently occupy and use at least 51 percent of the rentable property in an existing building and may lease up to 49 percent. In new construction, it must occupy at least 60 percent and may permanently lease up to 20 percent, with plans to grow into the rest.

The SOP adds that loan proceeds may not be used to improve or renovate space to be leased to a third party, and that a borrower has no more than one year to meet the occupancy requirement. If the building will be owned by a separate company, the SOP's Eligible Passive Company rules require that company to lease 100 percent to the operating company, and the operating company must be a guarantor or co-borrower.

Measure occupancy on the actual building before you make an offer. A plan that falls short of the required share may not fit the program.

SBA's 7(a) page says a business must be operating, for profit, located in the U.S. and small under SBA's size requirements. It must not be an ineligible type of business, and must be creditworthy with a reasonable ability to repay.

One test deserves early attention. The page also says the business must not be able to obtain the desired credit on reasonable terms from non-government sources. The lender must certify that. Under the SOP, that analysis can reach the liquidity of owners of 20 percent or more, and it covers conventional credit from the lender itself.

On repayment, the SOP is direct: the applicant's cash flow is the primary source of repayment, and if the analysis does not show reasonable assurance of repayment from cash flow, the loan must be declined, regardless of the collateral. A good building will not fix weak cash flow.

• ✓What is the lender's own minimum equity for this deal? The SOP sets 10 percent for start-ups and otherwise requires a determination that equity is sufficient.
• ✓Is the rate fixed or variable, and how would a higher payment affect our cash flow?
• ✓If the rate is variable, what would our payment be after a rate increase?
• ✓Which fees will be passed to us, and can they be financed?
• ✓What other collateral, including personal real estate, will the lender want?
• ✓Does the lender have authority to process the loan itself, and what does that do to timing?

The SOP sets a maximum upfront guaranty fee, charged on the guaranteed portion, that the lender may pass on to the borrower. For loans from $700,001 to $5,000,000 with a maturity over 12 months, the maximum is 3.5 percent of the guaranteed portion up to $1,000,000, plus 3.75 percent of the guaranteed portion over $1,000,000.

Hypothetical, for illustration: a $3,000,000 loan with a 75 percent guaranty has a $2,250,000 guaranteed portion. The maximum fee is 3.5 percent of $1,000,000, or $35,000, plus 3.75 percent of $1,250,000, or $46,875, for a total of $81,875. SBA may announce temporary changes for a fiscal year, so get the current figure from your lender.

Prepayment has its own rule. For loans with a maturity of 15 years or longer, a borrower that voluntarily prepays more than 25 percent in any one year during the first three years owes a subsidy recoupment fee: 5, 3 and 1 percent of the prepayment in years one, two and three. That fee goes to SBA, and the SOP says 7(a) lenders themselves may not charge prepayment fees. If you might sell or refinance early, look at this before you sign.

Because 504 proceeds cannot be used for working capital, 7(a) can be attractive when a purchase comes with other needs in one loan, such as equipment or working capital. It may also fit a smaller project, or one where the two-lender structure of a 504 adds more process than it is worth. Your lender can compare both for your deal.

1. Find a participating lender. SBA's Lender Match tool can connect you, and your local district office can answer questions.
2. Bring your financial statements, tax returns and a description of the building.
3. Ask for a written outline of amount, term, rate, fees, equity and collateral.
4. Set the financing contingency in your contract to match the lender's timetable, with your attorney's help.
5. Complete the appraisal, environmental investigation and insurance requirements before closing.

Tenant Advisory Group is a broker and not a lender, so we do not make, guarantee or approve loans. We help buyers find and negotiate buildings that fit the occupancy test and their operations, and we keep the contract dates aligned with the lender's process.