The Short Answer
If you have 30+ days to close, SBA almost always wins on total cost. If you have 2-3 weeks or less and the property is right, hard money can be a bridge to either an exit or to permanent SBA refinancing.
Side-by-Side
| Factor | SBA | Hard Money |
|---|---|---|
| Typical rate | Prime + 2.25% (~8.5%) | 9-14% |
| Origination fee | SBA guarantee fee 1.7-3.75% (financed) | 2-5 points up front |
| Term | 10-25 years amortized | 6-36 months, interest-only |
| LTV / LTC | Up to 90% | Up to 70-75% LTV |
| Close time | 45-90 days | 5-15 days |
| Underwriting focus | Cash flow + collateral | Collateral only |
| Owner occupancy required? | Yes (51%+) | No |
| Goodwill financed? | Yes (7a) | No (real estate only) |
| Prepayment | No penalty on 7(a) | Often 3-6 months minimum interest |
| Best for | Long-term hold or business acquisition | Bridge, flip, or distressed acquisition |
When Hard Money Makes Sense
- Time-sensitive opportunity: seller demands a 2-week close to lock the deal.
- Distressed or REO acquisition: property condition won't pass SBA underwriting until renovated.
- Repositioning play: you'll improve the property and refinance into SBA or conventional within 12-18 months.
- Investment property (non-owner-occupied): SBA isn't an option; hard money is the primary path.
- Bridge to SBA: close fast with hard money, then refinance into long-term SBA when stabilized (see Bridge to SBA 504 Refinance).
When SBA Wins (Usually)
- You have 60+ days to close.
- You want a long-term hold structure (not a flip).
- You'll occupy 51%+ of the property as the operating business.
- You don't have 30%+ equity to bring.
- The deal includes a business acquisition (not just RE).
The Real Cost Comparison
On a $1.5M commercial property with 25% equity vs 10% equity scenarios:
- Hard money 12-month bridge: 11% rate + 3 points + 10-month minimum interest. Total carry cost ~$165K-$200K on the loan over 12 months. Then refinance with closing costs.
- SBA 504 (25-year fixed CDC + bank): blended ~7% interest, $150K down (10%), $1.35M financed at ~$9,500/mo. Total interest paid in year 1 ~$95K.
SBA saves roughly $100K in year-one cost — if you can wait 60 days to close.
The bridge-to-SBA play. If the deal is time-critical but the property is otherwise great, close with hard money, then refinance into 504 within 12 months. The 504 refi rules allow you to take out existing commercial debt on owner-occupied property. This combines hard money's speed with SBA's long-term cost structure.
Need long-term financing? Skip the bridge if you can.
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