Owner-Occupied Is the Key Phrase
Both SBA programs require the borrower's operating business to occupy at least 51% of the property (60% for new construction, with plans to reach 80% within 10 years). This rules out pure-investment CRE but covers virtually everything else: office buildings, retail strip centers (where you operate one of the tenants), warehouse/distribution, light industrial, medical/dental buildings, hotels, restaurants, storage facilities, manufacturing, daycare, and more.
CRE Financing Guides
504 & CRE Foundations
Property Types
When CRE Loans Go Wrong
The 504 vs 7(a) Decision for CRE
For owner-occupied commercial real estate over $1M, the SBA 504 is almost always the better choice. The 504 lets you split the financing into a conventional first mortgage (50%), a 25-year fixed-rate SBA debenture (40%), and 10% borrower equity. The fixed rate on the SBA portion is uniquely valuable — you're rate-locked for 25 years on the largest chunk of long-term debt you'll ever take.
For smaller CRE deals (under $1M total), the 7(a) often wins because it's a single-lender, single-loan structure that closes faster. For deals that combine CRE + working capital + business acquisition, the 7(a) is the only single-loan path.
Property Types That Work Best
- Owner-occupied office (professional services, medical, dental, law, accounting)
- Retail with owner-operated tenant (single-tenant or multi-tenant where you're one of them)
- Warehouse + distribution (especially for operating businesses with growing footprint needs)
- Light industrial / manufacturing
- Mixed-use where the borrower's commercial business is 51%+ of SF
What Doesn't Work
- Pure investment CRE (no owner-occupant)
- Multifamily where the operating business doesn't occupy 51%+
- Speculative ground-up development (no operating tenant identified)
- Raw land
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