SBA Loans in California: 7(a) and 504 Programs

I’m Michael DiVita — DRE #01372066 | NMLS #241655, DiVita Home Finance (DRE #01818285 | NMLS #323700), Tiburon, CA. I’ve been in California lending since 2000 and founded DiVita Home Finance in 2007. I’m known as a creative mortgage broker: when a bank says no, I find the lender and the loan structure that can say yes. I help California business owners find the right SBA lender and structure for their deal. Call (800) 239-1103.

SBA loans are bank loans partially guaranteed by the U.S. Small Business Administration, which lets lenders offer small businesses lower down payments and longer terms than conventional business credit. The two main programs are the SBA 7(a), a flexible loan for almost any business purpose, and the SBA 504, a long-term fixed-rate loan for owner-occupied real estate and major equipment.

The SBA doesn’t lend the money itself — participating banks, credit unions and Certified Development Companies (CDCs) do, and each one has its own appetite and credit overlays. Some won’t touch restaurants or startups; some are fast on acquisitions; some are strong on medical practices. My job is to match your deal to a lender that actually wants it, help you assemble a complete package, and keep the process moving.

SBA 7(a) vs. SBA 504 at a Glance

Since July 4, 2026, the SBA allows a single business to carry up to $5 million in 7(a) loans plus up to $5 million in 504 loans — a combined $10 million.

SBA 7(a) Loans

The 7(a) is the SBA’s most flexible program and the primary tool for buying an existing business. The SBA guarantees 85% of loans of $150,000 or less and 75% of larger loans, which is what lets lenders say yes to businesses that don’t have enough collateral for a conventional commercial loan.

7(a) maximum rates

The SBA caps how far above the base rate a lender can price a variable-rate 7(a):

• $50,000 or less: base rate + 6.5%
• $50,001–$250,000: base rate + 6.0%
• $250,001–$350,000: base rate + 4.5%
• Over $350,000: base rate + 3.0%

Those are ceilings, not quotes. The SBA also charges an upfront guaranty fee on the guaranteed portion that varies by loan size and fiscal year — ask your lender for the current figure.

7(a) variations

• SBA Express: up to $500,000, with the SBA committed to respond to the lender within 36 hours. Lower guaranty, so lenders are pickier.
• Microloans: up to $50,000 through nonprofit intermediaries, for very small or early-stage needs.
• Preferred Lenders (PLP): lenders with delegated authority to approve 7(a) loans without sending the file to the SBA for credit review, which usually saves time.

SBA 504 Loans

The 504 is built for business owners who want to own the building they operate from. A typical project is financed 50% by a bank first mortgage, up to 40% by a CDC second loan funded by an SBA-guaranteed debenture, and 10% by you. The CDC portion carries a long-term fixed rate tied to the 10-year Treasury, which is the program’s main advantage over a conventional commercial loan — along with needing roughly 10% down instead of the 25–35% most commercial lenders want.

• Occupancy: your business must occupy at least 51% of an existing building (60% for new construction). You can lease out the rest, and that rent can help cover the payment.
• Eligible uses: buying, building or renovating owner-occupied real estate; long-term machinery with at least 10 years of useful life; qualified refinancing.
• Not eligible: working capital, inventory, or speculation and investment in rental real estate.
• Size test: businesses can qualify under their industry size standard or the alternative test — tangible net worth under $20 million and average net income under $6.5 million after taxes for the prior two years.

Example: a $2,000,000 owner-occupied building. Bank first loan $1,000,000 (50%), CDC loan $800,000 (40%), your equity $200,000 (10%) plus closing costs. With conventional commercial financing at 25–35% down, the same purchase would need $500,000–$700,000.

Which one for a building?

For a straightforward owner-occupied purchase you plan to hold long-term, the 504’s fixed rate usually wins. The 7(a) makes more sense when the deal combines real estate with a business acquisition, equipment or working capital; when the timeline is tight; or when the project is small enough that the 504’s two-loan structure isn’t worth the extra work. If you’ll sell or refinance within a few years, compare total cost over your actual hold period, including any prepayment terms.

Who Qualifies

• For-profit, operating business in the U.S. that meets the SBA size standard for its industry (by NAICS code).
• Ownership: under SBA rules effective March 1, 2026, 100% of the business’s direct and indirect owners must be U.S. citizens or U.S. nationals whose principal residence is in the U.S. Lawful permanent residents no longer qualify for 7(a) or 504 loans.
• Ability to repay from business cash flow (or credible projections for a startup).
• Credit elsewhere: the lender must document that you can’t get comparable credit on reasonable terms without the SBA guarantee.
• Personal guarantees from every owner of 20% or more.
• No delinquent federal debt or prior defaulted government loans.
• Eligible business type. Ineligible examples include lenders and passive real estate investors, speculative businesses, and businesses illegal under federal law — which includes cannabis businesses even though they’re legal in California.

Credit score: the SBA doesn’t publish a minimum, but lenders set their own, and a weaker score usually has to be offset by strong cash flow, collateral and experience.

Collateral: lenders are expected to take available collateral, which can include a lien on your home if you have meaningful equity. An SBA loan generally isn’t declined solely for lack of collateral, but understand what you’re pledging: the guarantee protects the lender, not you.

Buying a Business with an SBA 7(a)

The 7(a) can finance the purchase price (including goodwill), equipment, inventory, working capital for the transition and needed improvements. Key rules and realities:

• Equity injection: at least 10% of the project for a complete change of ownership.
• Seller financing: a seller note can count toward up to half of that 10% only if it’s on full standby — no payments — for the life of the SBA loan. A seller note that isn’t on full standby can still be part of the deal, but not as your equity.
• Valuation: an independent business valuation is required when the amount financed for the purchase (less appraised real estate and equipment) exceeds $250,000, or when buyer and seller are related. The SBA won’t finance a price the business’s cash flow can’t support.
• Diligence: expect the lender to review the seller’s last three years of business tax returns and financials, interim statements, the purchase agreement, the lease and any franchise agreement.

Example: a $1,000,000 acquisition with $100,000 (10%) buyer equity and a $900,000 SBA 7(a). If the seller carries a $50,000 full-standby note, it can count toward half the injection, so the buyer’s cash could be $50,000 and the SBA loan still $900,000.

Startups and Franchises

The SBA has no minimum time-in-business rule, so startups can qualify — but lenders substitute other evidence for operating history:

• Industry experience is the biggest factor. A chef opening a restaurant or a dentist opening a practice is a very different risk from a first-time operator in an unfamiliar industry.
• A real business plan with month-by-month projections tied to market research, not a template.
• Equity: at least 10% under SBA rules; many lenders want more for a startup.
• Reduce uncertainty: a signed or negotiated lease, contractor bids, supplier commitments and personal financial strength all help.

Franchises must be on the SBA Franchise Directory, which the SBA reinstated in 2025, for the lender to rely on a streamlined eligibility review. Buying an existing franchise location with operating history is usually easier to finance than a new unit.

Industry Notes

• Restaurants: buying an existing, profitable restaurant is far easier to finance than a new concept. Lenders will look at POS data, the lease and current labor costs — California’s $20 minimum wage for most national fast-food chains (since April 2024) and other wage increases have changed restaurant margins, so bring current numbers.
• Medical and dental practices: among the most active SBA categories. The 7(a) handles practice acquisitions, equipment and build-out; the 504 is usually the better fit to buy the office or medical condo.
• Retail: lenders may compare revenue on your tax returns with sales reported to the California Department of Tax and Fee Administration (CDTFA). Inconsistencies are a red flag.
• Leases: when loan proceeds fund leasehold improvements, lenders generally want the lease (including renewal options) to run at least as long as the loan. Talk to me before you sign a lease.

How Long an SBA Loan Takes

Timelines depend far more on the completeness of your file than on anything else. As a rough guide:

• SBA Express: often a few weeks once the lender has a complete file.
• Standard 7(a): commonly 30–90 days; a Preferred Lender can shorten it.
• 504: often 60–90 days or more, since the bank and CDC both underwrite and real estate needs an appraisal and environmental review.

Common delays: missing tax returns or schedules, inconsistent financials, commercial appraisals, environmental reports, and slow answers to lender questions.

Documents to Prepare

• Three years of business tax returns and financial statements (or projections for a startup)
• Three years of personal tax returns for each 20%+ owner, plus the SBA personal financial statement (Form 413)
• Year-to-date profit and loss statement and balance sheet
• Business plan and resumes showing industry experience
• Lease or letter of intent; purchase agreement for an acquisition or property
• Franchise agreement and disclosure document, if applicable
• Debt schedule and entity documents

Frequently Asked Questions

What’s the difference between an SBA 7(a) and an SBA 504 loan?

A 7(a) is a single SBA-guaranteed loan from one lender that can fund almost any business purpose, including working capital and buying a business, up to $5 million. A 504 combines a bank loan, a CDC loan with a long-term fixed rate and about 10% down, and can only fund owner-occupied real estate and long-life equipment.

Can a startup get an SBA loan in California?

Yes. There’s no minimum time in business, but lenders lean heavily on your industry experience, a detailed business plan, personal credit and financial strength, and at least a 10% equity injection — often more. Buying an existing business or a franchise with a track record is usually easier to finance than a brand-new concept.

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

No. Both programs finance real estate only when your operating business occupies it — at least 51% of an existing building, or 60% for new construction. For rental or investment property, look at DSCR loans or commercial loans.

What credit score do I need for an SBA loan?

The SBA doesn’t set a minimum score; each lender sets its own. Strong cash flow, collateral and industry experience can offset a weaker score with some lenders, which is why matching the deal to the right lender matters.

Can green card holders get SBA 7(a) or 504 loans?

Not under the rules that took effect March 1, 2026. For new 7(a) and 504 loans, every direct and indirect owner of the business must be a U.S. citizen or U.S. national with a principal residence in the U.S. Lawful permanent residents are no longer eligible, so these owners should look at conventional or non-SBA business financing.

How long does an SBA loan take to close?

SBA Express loans can close in a few weeks with a complete file. Standard 7(a) loans commonly take 30–90 days, and 504 loans often take 60–90 days or more because two lenders underwrite and real estate needs an appraisal and environmental review. A complete document package is the biggest factor you control.

Related Resources

• Commercial Real Estate Loans in California
• Hard Money Loans in California
• Bridge Loans in California
• Self-Employed Mortgages
• Bank Statement Loans
• Physician Home Loans