SBA Loan Enhancements: Everything You Need to Know

Under normal circumstances, the SBA’s loan programs offer many advantages for small businesses trying to secure capital. With recent economic aid passed by Congress (Economic Aid Act), the benefits for small business owners are even better. Let us support you and your small business with the new SBA loan enhancements, including:

  • SBA will pay your principal and interest for up to three months up to $9,000
  • No SBA fees, subject to change based on additional guidance from SBA
  • Fully amortized/no balloons
  • Loans can include working capital to support your operations
  • Loans from $250K – $5M+, varies by product
  • Loan terms 10 years for business acquisition, up to 25 years for real estate
  • No prepayment penalties for loan terms under 15 years 

Loans that are approved between 2/1/21 and 9/30/21 will receive these benefits once the loan is fully disbursed, subject to availability of funds. Live Oak is dedicated to getting capital in the hands of small businesses across the country. To better understand the difference between SBA 7(a) loans and SBA 504 loans, we’ve highlighted some of the key differences here. Let our experienced lending team help you determine which loan program is the best fit for your business needs.


SBA 7(a) Loan Basics

The SBA 7(a) loan is the most common SBA loan product, offering flexibility on terms and business uses. SBA loans allow businesses to obtain capital with less equity than a conventional loan. As the nation’s number one SBA 7(a) lender by dollar amount,* Live Oak Bank will help you simplify the loan process. Our Preferred Lender Status (PLP) with the SBA gives us authority to make final credit decisions without having to get SBA approval.

There are countless advantages to the SBA 7(a) program, including:

  • Up to 90% bank financing
  • Minimal collateral requirements
  • Fully amortized/no balloons
  • No pre-payment penalties for loan terms under 15 years

The 7(a) loan program is the most popular because the borrower can use the capital for a wide range of uses, including:

Here’s an overview on how the SBA 7(a) loan program works.

  • Maximum loan amount: $5 million
  • Interest rate: Varies based on prime rate plus lender spread
  • Down payment: Typically 10% of project amount
  • Collateral: Personal guarantees required from all owners of 20% or more of the business; Personal assets may be required to meet SBA collateral guidelines
  • The common loan terms for SBA 7(a) loans are the following:
    • Business acquisition (no real estate) – 10-year maximum
    • Machinery and equipment – 15-year maximum
    • Real estate (51% or more allocated to real estate) – 25-year maximum

As a small business owner, the 7(a) loan program may be a good fit for you if the following apply:

  • Profitable existing business
  • Acceptable debt service coverage
  • Good personal credit score (650 minimum)
  • For-profit business
  • Two-year average net profit after taxes up to $5 million
  • Located in the United States

If you’d like to reach out and discuss your options about securing capital with a SBA 7(a) loan, here is what we need to get started.

  • Purpose of the loan
  • Business background and plan
  • Business debt schedule
  • Personal tax returns (three years)
  • YTD financials
  • Personal financial statement
  • Other eligibility information (personal background, character, credit)
  • Resume
  • Business tax returns and financials (three years from existing business and/or selling business)
  • Projections

*#1 SBA 7(a) Lender by dollar amount for FY 2020. – the data supplied by the SBA reflects 7(a) highest dollar volume during FY 2020.


SBA 504 Loan Basics

An SBA 504 loan is a long-term financing solution for business owners to buy commercial real estate, machinery, equipment or other fixed assets.



SBA 504 loans are structured differently than other SBA loan programs and it’s important to understand that 504 loans are composed of three distinct parts—the lender, Certified Development Company (CDC) and a borrower. In most cases, SBA 504 loans are structured in a 50-40-10 model. First is the bank loan, which is 50% of the total amount. Second is a Certified Development Company (CDC) who provides 40% of the total loan amount. And third is the borrower who provides a 10% down payment. New businesses that have been in operation for less than two years, as well as special purpose properties, are required to provide an equity amount of 15%, creating a 50-35-15 structure. If you are both a new business AND a special purpose property, the borrower’s equity requirements change to 20%, following a 50-30-20 model.


What is a Special Purpose Property?

The SBA defines a special purpose property as “a property that is appropriate for one use or limited use: a building that cannot be converted to another use without a large capital investment.” This includes but is not limited to: amusement parks, cemeteries and funeral homes, nursing homes/assisted living facilities, hotels and motels, wineries, museums, gas stations and hospitals. A complete list of special purpose properties can be found in the SBA’s SOP linked here.


What is a CDC?

Approved and regulated by the SBA, a Certified Development Company (CDC) is a nonprofit corporation which aims to support their local economy. With over 260 CDCs throughout the nation, each office has a specific regional focus. CDCs typically have a strong grasp of the region’s unique needs and challenges, making them well-suited to foster long-term growth within their community. CDCs are certified to originate and service SBA 504 loans and work directly with lenders to provide financing to small businesses, contributing to economic development.


504 Loan Example

Let’s talk through how a 504 loan works in real life. Robert is a small business owner who needs $1,000,000 to renovate his current building, as well as upgrade some heavy machinery for his business. His lender provides $500,000 for the first loan, while a CDC provides $400,000 through an SBA-guaranteed debenture and finally, Robert is responsible for the remaining $100,000 as a down payment. Robert will make payments on his 504 loan directly to his lender.


This is a chart showing the structure of what an SBA 504 loan with recent SBA loan enhancements would look like with Live Oak Bank.


While the eligibility requirements for a 504 loan are nearly the same as for the 7(a) loan program, the approved uses of the loan are different. They fall into three main categories: buying commercial real estate, financing improvements within that real estate and purchasing large equipment. The maximum loan amount can be up to $15 million with maturity rates up to 25 years and low, fixed interest rates.

Let’s discuss opportunities and determine how we can take advantage of the SBA’s loan enhancements to grow your business, together. For more information, visit