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SBA Loans to Buy a Commercial Building: SBA 504 vs. 7(a) in the Inland Empire

By Javier Brown, Commercial Real Estate Agent, MGR Real Estate, Inc. · DRE #01755491 · Ontario, CA

Important: I'm a commercial real estate agent, not a lender, and this guide is general information, not financial, legal, or tax advice. SBA rules, fees, and rates change. Before you make an offer, talk to an SBA lender or a Certified Development Company (CDC) and your CPA. I'm happy to introduce you to SBA lenders I work with.

If you own a business in the Inland Empire and you're tired of paying rent, an SBA loan to buy a building may let you own your own warehouse, shop, or office with as little as 10% down. This guide explains, in plain English, how the SBA 504 loan for commercial property and the SBA 7(a) loan work, what you need to qualify, and how I help owner-users find the right building.

What is an SBA loan?

The U.S. Small Business Administration (SBA) doesn't usually lend the money itself. It guarantees part of a loan made by a bank or a Certified Development Company (CDC). Because the government shares the risk, lenders can offer lower down payments and longer terms than a typical commercial mortgage. The two programs most owner-users use to buy real estate are the SBA 504 and the SBA 7(a).

SBA 504 vs. SBA 7(a): which one fits?

Since July 4, 2026, SBA allows eligible borrowers to combine up to $5 million in 7(a) and up to $5 million in 504 financing, for up to $10 million total. Your lender will confirm what applies to you.

How an SBA 504 loan is structured

• About 50% comes from a bank or other private lender, with a first lien on the property.
• Up to 40% comes from a CDC, funded by a 100% SBA-guaranteed debenture, with a second lien.
• At least 10% comes from you, the borrower.

The CDC portion carries a fixed rate for 10, 20, or 25 years. The bank sets its own rate and terms on the first loan.

SBA 504 down payment: how much do you need?

• 10% for most established businesses buying a general-purpose building like a warehouse, industrial building, or office.
• 15% if the business is a startup (generally under two years old) or the property is special-use, like a gas station, hotel, car wash, or school.
• 20% if it's both a startup and a special-use property.

Compare that with a typical conventional commercial loan, where buyers often put down 25% to 30% or more.

The 51% owner-occupancy rule

SBA real estate loans are for owner-users, not investors. Your business must occupy at least 51% of an existing building. You can lease the rest to tenants, which can help pay the mortgage. For new construction, the business generally must occupy at least 60% at first, with plans to use more over time. Buying a fully leased building as an investment does not qualify.

SBA 504 rates and terms

The fixed rate on the CDC portion is set when SBA sells its debentures to investors each month. It's pegged to an increment above the 10-year U.S. Treasury rate, and the published "effective rate" includes the ongoing fees.

Rates change every month. As an example only, the October 2026 SBA 504 effective rates published by CDCs were about 6.97% for 25 years, 6.97% for 20 years, and 6.6% for 10 years. Manufacturers and some other borrowers were roughly 0.25% lower because of fee waivers. Ask your lender or CDC for today's rate.

The bank's first loan usually carries a market rate, which can be fixed or adjustable. 7(a) rates are negotiated, but SBA caps how high they can go above the prime rate.

What fees should you expect?

• SBA 504: SBA says the fees total about 3% of the CDC portion, and they can usually be financed into the loan. The bank may also charge its own fees.
• SBA 7(a): the lender pays SBA an upfront guaranty fee and may pass it on to you. SBA resets the fee every fiscal year, so ask your lender for the current amount.
• Normal closing costs: appraisal, environmental report, title, escrow, and legal costs.
• Prepayment: 7(a) loans of 15 years or more have a prepayment fee in the first three years (5%, 3%, 1%). The 504 portion also has a declining prepayment penalty, so ask your CDC for the details.

Who qualifies? SBA eligibility basics

• An operating, for-profit business located in the U.S.
• Small under SBA size standards (most Inland Empire owner-users are)
• Not an ineligible business type, such as passive real estate investing or speculation
• Good credit, management experience, and the cash flow to repay the loan
• Owners of 20% or more usually sign a personal guaranty
• Citizenship and residency requirements apply. Your lender will explain the current rules.

What you need to apply

• Business tax returns for the last 3 years and personal tax returns for each owner
• Year-to-date profit and loss statement and balance sheet
• Personal financial statement (SBA Form 413) and the SBA borrower form (Form 1919)
• Business debt schedule, entity documents, and business licenses
• A signed purchase agreement or letter of intent for the property
• Proof of your down payment funds
• A business plan and projections, especially for startups

How long does an SBA loan take?

Every deal is different, but a typical timeline to buy an existing building looks like this:

1. Pre-qualification: about 1 to 2 weeks with an SBA lender or CDC
2. Find the building and open escrow: write an offer with financing and inspection contingencies
3. Underwriting, appraisal, and environmental report: about 3 to 6 weeks
4. SBA approval: often a few days to a few weeks
5. Closing: many purchases close in about 60 to 90 days from a signed contract

With a 504, the bank funds the whole loan at closing, including an interim loan for the CDC portion. The CDC's debenture replaces that interim loan, usually within a few months.

Why owning with an SBA loan beats renting

• Low down payment: as little as 10% down, so you keep more cash.
• Fixed rate: the 504 portion is locked for up to 25 years, which protects you from rising rates.
• Long term: 20 to 25 year payoff keeps payments manageable.
• Build equity instead of paying rent: each payment pays down your own loan, and you own the building.
• Preserve cash: keep money for equipment, payroll, inventory, and growth.
• Control: no landlord, no surprise rent increases, and no lease non-renewal.

Want to see what renting really costs over time? Try my Commercial Lease Cost Calculator.

Example: buying a $2,000,000 Inland Empire industrial building

Hypothetical numbers, for illustration only. Your lender will set the actual terms.

Closing costs and SBA fees are extra. The roughly 3% 504 fee (about $24,000 on an $800,000 CDC loan) is usually financed. Your business would need to occupy at least 51% of the building.

How I help Inland Empire owner-users

• Finding SBA-eligible buildings: warehouses, industrial buildings, flex, and office space in Ontario, Rancho Cucamonga, Fontana, Rialto, San Bernardino, Riverside, and across the Inland Empire.
• Owner-user space: buildings where you can occupy at least 51% and lease out the rest.
• Coordinating with lenders: I introduce you to SBA lenders and CDCs, and I keep the appraisal, environmental report, and escrow on schedule.
• Writing the offer: offers with the right financing contingencies and enough time for SBA approval.
• Bilingual service: I work in English and Spanish.

Other ways to buy: read my seller carry back financing guide. Already own property? Get a free commercial property valuation. More guides are on the guides page.

SBA loan FAQs

What is the SBA 504 down payment?

Usually 10% of the project cost. It's 15% for a startup or a special-use property, and 20% if both apply.

Can I use an SBA loan to buy an investment property?

No. SBA real estate loans are for owner-users. Your business must occupy at least 51% of an existing building, and you can lease out the rest.

What is the maximum SBA 504 loan?

The SBA (CDC) portion is up to $5 million for most projects and $5.5 million per project for small manufacturers and eligible energy projects. The bank loan is on top, so total projects can be much larger.

Is the SBA 504 rate fixed?

Yes. The CDC portion has a fixed rate for 10, 20, or 25 years, set when the debenture is sold. The bank's first loan has its own rate. Rates change monthly.

Should I choose SBA 504 or 7(a)?

The 504 is usually best for buying a building, because of the long fixed rate and 10% down. The 7(a) is more flexible when you also need working capital or are buying a business. An SBA lender can compare both for you.

How long does it take to close an SBA loan?

Many building purchases close in about 60 to 90 days from a signed contract, depending on the appraisal, environmental report, and how fast you provide documents.

Can a startup get an SBA loan to buy a building?

Sometimes. Startups usually need at least 15% down, strong projections, and relevant experience.

Is Javier Brown a lender?

No. Javier Brown is a commercial real estate agent with MGR Real Estate, Inc. He helps you find SBA-eligible buildings and works with SBA lenders and CDCs, who make the loan decisions.

Javier Brown · MGR Real Estate, Inc. · DRE #01755491 · Ontario, CA · (909) 641-0582