Invest in Hospitality: Leverage SBA Loans for Rental Property Ventures

Can You Use an SBA Loan for Rental Property? The Key Difference

Yes, you can use a Small Business Administration (SBA) loan for real estate. Still, the key is the business use and the occupancy rule. The SBA’s programs are designed to fund small businesses, not passive investments. This means the property must be actively used for your primary business operations. For an existing building, your business must occupy at least 51% of the rentable space; for new construction, it must occupy at least 60%. This crucial distinction allows the purchase of commercial properties, such as hotels and motels, as well as owner-occupied vacation rentals. Still, it strictly prohibits funding for passive residential rental properties (e.g., apartments or single-family homes).

The SBA’s flagship programs—the SBA 7(a) and SBA 504 loans—are potent tools for hospitality investors. The programs are designed to mitigate lender risk by guaranteeing a portion of the loan, leading to significant borrower benefits. For example, SBA loans often offer lower down payments (sometimes as low as 10%) and longer repayment terms (up to 25 years for real estate) compared to conventional financing, making significant acquisitions and new construction far more accessible. Data from the SBA shows that the hospitality sector has historically been one of the most active industries in using the SBA 7(a) loan program for expansion and acquisitions.

The potential in the hospitality real estate sector—spanning boutique hotels, branded motels, and specialized vacation rentals—remains immense. Securing the right capital is the essential first step to capitalizing on this market.

At HotelLoans.Net, we are your dedicated correspondent and table lender, specializing exclusively in hospitality real estate finance. With 30 years of underwriting expertise, we guide you through the intricacies of SBA regulations, ensuring your project is structured for success. Over the coming sections, you will learn the crucial difference between a qualified business property and a passive rental, the specific SBA loan types best suited for hotels, detailed eligibility requirements, and the step-by-step process for submitting a successful application to secure the funding you need.

The Owner-Occupancy Rule: What Counts for an SBA Loan for Rental Property

The most common misconception about using an SBA loan for rental property stems from the owner-occupancy rule. The U.S. Small Business Administration (SBA) does not fund passive real estate investments, such as standard residential rental properties (single-family homes, duplexes, or apartment complexes). Their programs are strictly for the financing of assets used in the active operation of a small business. This distinction is the gatekeeper to securing an SBA real estate loan.

The core rule is simple: your business must occupy a significant portion of the property.

• Existing Property: The small business must occupy at least 51% of the total rentable square footage.
• New Construction/Major Renovation: The small business must initially occupy at least 60% of the rentable square footage, with a written plan to reach 80% occupancy within 10 years.

This means you can purchase a commercial building where you run your business and rent out the remaining 49% (or 40%) of the space, generating supplemental rental income. This loophole is often a key benefit of the SBA 504 and 7(a) programs for business owners looking to build equity while controlling their occupancy costs.

SBA Loan Eligibility for Hospitality and the 51% Rule

The hospitality sector—including hotels, motels, and owner-operated short-term rental properties—is inherently designed to qualify under the owner-occupancy rule because the entire property is considered owner-occupied for business operation.

• Hotels and Motels: The business being financed is the hotel or motel operation. The lobby, kitchen, manager’s office, guest rooms, and common areas all contribute to the business’s active operation. Therefore, a 100-room hotel is considered 100% owner-occupied by the hotel business, instantly satisfying the 51% threshold. The SBA recognizes the hospitality industry as a high-utilization borrower of its programs due to the need for significant fixed asset financing. While specific, recent, government-published statistics by industry may fluctuate, SBA data consistently ranks the Accommodation and Food Services sector among the top recipients of 7(a) loan dollars.
• Multi-Family/Mixed-Use Exceptions: While a purely multi-family residential rental property does not qualify, a mixed-use building can qualify if the borrower operates an eligible business on-site that meets the 51% occupancy rule. For instance, if you purchase a three-story building and actively run a full-service laundry or property management office on the entire first two floors (more than 51% of the total space), you could rent out the top floor’s residential units.

SBA Loan for Short-Term Rental Property Airbnb—A Viable Path?

Can you use an SBA loan for an Airbnb or another short-term rental (STR) property? Yes, but only if the operation is clearly structured as an active business, not a passive investment.

The crucial distinction lies in the level of active management and services provided.

Suppose your business provides active, hotel-like services, and the entire property is necessary for that operation (i.e., you are acquiring a multi-unit property and running a dedicated hospitality company). In that case, the SBA may view it as an eligible hospitality business rather than an ineligible passive rental. We specialize in structuring these deals to clearly demonstrate the active business model, making them viable for the SBA 504 and 7(a) programs.

SBA Loan vs Conventional Loan for Rental Property: Which is Your Best Bet?

Choosing the right financing is critical when acquiring a hospitality property or an owner-occupied mixed-use commercial space. While SBA loans (7(a) and 504) offer exceptional terms, the Owner-Occupancy Rule severely restricts their use for purely passive investment properties. For those deals, you’ll need to look at Conventional Commercial Loans or specialized DSCR (Debt Service Coverage Ratio) Loans.

We specialize in all three, and understanding their differences is your key to securing the best terms:

The Pros and Cons of Using an SBA Loan for Rental Units

Suppose your rental property qualifies as an active business (such as a hotel, motel, or an actively managed short-term rental portfolio). In that case, an SBA loan offers compelling advantages. However, the benefits come with strict requirements and a borrower’s commitment.

Pros (The Key Advantages)

• Low Down Payment: Requirements often mandate as little as 10% down, allowing you to preserve significant working capital for renovations, operations, and other business growth.
• Long Repayment Terms: Real estate is financed over up to 25 years, resulting in lower monthly payments and freeing up cash flow compared to the shorter amortization schedules typical of conventional loans.
• Competitive Rates: Because of the government guarantee, SBA loans often offer competitive interest rates — fixed or variable — making long-term budgeting more predictable.
• High Loan-to-Value (LTV): The SBA generally offers LTVs up to 90%, which is higher than most traditional commercial loans.

Cons (The Strict Requirements)

• Owner-Occupancy Rule: This is the biggest hurdle. The property must be 51% owner-occupied for the borrower’s active business, instantly disqualifying passive residential rental complexes.
• Lengthy Application Process: The due diligence required by the SBA and its partner lenders (like us) is extensive, which significantly lengthens the closing process compared to a conventional or DSCR loan.
• Personal Guarantee Required: The SBA requires a full personal guarantee from all owners with a 20% or greater equity stake, meaning your personal assets are at risk if the business defaults.
• Collateral Requirements: The SBA requires all available business and personal equity to be pledged as collateral to minimize the government’s risk exposure.

The choice between an SBA loan, a Conventional loan, or a DSCR loan ultimately hinges on your specific property’s use and your individual financial profile. For owner-occupied hospitality assets, the SBA is usually the most financially advantageous path.

Best SBA Loans for Real Estate Investors Rental Property: The 7(a) and 504

For investors focused on the owner-operated hospitality sector—from acquiring an existing motel to funding ground-up construction of a new hotel—the Small Business Administration offers two primary financial instruments: the versatile SBA 7(a) Loan and the capital-intensive SBA 504 Loan. Neither program is designed for passive residential rental income. Still, both are ideally structured for active hospitality businesses where the property is integral to the operation. Understanding the core difference between these two programs is the key to choosing the best path for your next hospitality investment.

Guide to SBA 7(a) Loan for Rental Property Investment and the $5 Million Max

The SBA 7(a) loan program is the most popular and flexible of the government-backed options. It is often the preferred choice for acquiring owner-operator hotel investment properties or a restaurant investment property, particularly when the deal requires a combination of real estate, equipment, and operating capital.

What the 7(a) Loan Covers

The 7(a) program’s sheer versatility makes it invaluable. It is not limited strictly to real estate, making it perfect for an acquisition where you need to bundle multiple costs into a single loan:

1. Acquisition and Construction: Financing the purchase of commercial real estate, including owner-occupied hotels or mixed-use properties (subject to the 51% rule).
2. Renovation and Equipment: Funding property improvements, purchasing significant fixed assets like commercial kitchen equipment, laundry systems, and guest room furniture.
3. Working Capital: Funds can be used for ongoing business expenses, inventory, or payroll during the initial ramp-up phase.
4. Refinancing: It can be used to refinance existing debt, provided the original debt was used for an SBA-eligible business purpose and the transaction results in a substantial financial benefit to the borrower (e.g., lower monthly payments or a longer term).

Key Loan Details

• Maximum Loan Amount: The maximum allowable loan amount through the 7(a) program is $5 million. This limit restricts the overall size of the transaction, though the government’s guaranteed portion is capped at $3.75 million (75% of $5 million).
• Guarantee Percentage: For loans greater than $150,000, the SBA guarantees 75% of the loan amount to the lender, reducing the lender’s risk. This is the mechanism that allows lenders to offer such favorable terms.

Term Lengths: The repayment schedule depends on the use of funds:

• Real Estate Acquisition: Up to 25 years (fully amortizing).
• Equipment/Working Capital: Up to 10 years.
• If the loan is a mixed-use request (real estate plus working capital), the term is a weighted average based on the primary use, with a maximum of 25 years.

SBA 504 Loan for Commercial Rental Property Purchase (Fixed Assets)

The SBA 504 loan program is specifically designed to facilitate major fixed-asset purchases—chiefly land, buildings, and long-term machinery. It is the premier choice for large-scale projects like building a new motel or acquiring a large, high-value hospitality investment property, as it allows for a higher overall project cost than the 7(a) program structure typically permits.

What the 504 Loan Covers

The 504 program is characterized by its focus on long-term growth and fixed assets:

• Land Acquisition and Construction: Ideal for ground-up construction projects, providing long-term, fixed-rate financing for significant assets.
• Building Purchase and Renovation: Financing the acquisition of an existing building or funding substantial renovations that add significant value to the property.
• Heavy Equipment: Purchasing fixed, long-term machinery and equipment necessary for the business operation.

The 50-40-10 Loan Structure

The 504 loan is unique because it involves three parties and is structured into three distinct financial tranches:

1. 50% First Lien Lender: A private-sector lender (like a bank or credit union) provides up to 50% of the total project cost. They hold the first mortgage position and set market-based interest rates and terms (typically 10 years).
2. 40% CDC/SBA Debenture: A Certified Development Company (CDC), a non-profit organization authorized by the SBA, provides the second portion, covering up to 40% of the project cost. This loan is backed by an SBA-guaranteed debenture. This portion features an attractive, below-market fixed interest rate. It can be amortized over 20 or 25 years, providing long-term stability. The maximum SBA debenture size for a typical project is $5 million ($5.5 million for manufacturers or green energy projects), with no limit on the first lien size.
3. 10% Borrower Equity: The borrower (you, the business owner) must inject a minimum of 10% of the total project cost as a down payment. This minimum increases to 15% for startups or special-use properties (like hotels). It can increase further if the property is both a startup and a special-use property.

This 50-40-10 model is powerful because the lender’s risk is cut in half, making them more willing to offer more favorable terms. At the same time, the borrower benefits from a low down payment and a long-term, fixed rate on the majority of the debt.

Can I use an SBA loan to refinance rental property?

Yes, you can use both the SBA 7(a) and SBA 504 programs to refinance existing commercial real estate debt, but only under specific, strict conditions:

1. Eligible Property Requirement: The property being refinanced must currently be, and must continue to be, an owner-occupied property that meets the 51% (existing property) or 60% (new construction) occupancy rule. This means the refinancing must support an active business (like your hotel, motel, or qualifying STR operation), not a passive investment.
2. Financial Benefit Test (7(a)): For the 7(a) program, refinancing is generally allowed if it consolidates multiple business debts or significantly improves the cash flow of the small business. The debt being refinanced must have been used for an eligible SBA business purpose.
3. The SBA 504 Refinance Program: The 504 program includes a dedicated Debt Refinancing with Expansion option, which allows you to refinance existing commercial debt while also funding an expansion of the project (e.g., adding new rooms or a pool to your existing motel). There is also a program for refinancing without expansion, provided the existing debt is not a government-guaranteed loan and the refinance provides a net tangible benefit.

Important Note: You cannot use a new SBA loan (7(a) or 504) to refinance an existing SBA loan unless it is allowed explicitly under an official SBA refinance debt program. If you have conventional debt on your hotel, both SBA programs offer pathways to refinance into long-term, 25-year financing.

The Path to Funding: How to Get an SBA Loan for Hospitality Rental Property

Securing an SBA loan for a hospitality property—such as a hotel, motel, or actively managed short-term rental business—requires a meticulous focus on demonstrating that your venture is an active business operation and not a passive investment. The SBA is a powerful resource, supporting over 100,000 financings to small businesses in Fiscal Year 2024. Still, success hinges on meeting their specific criteria.

Step 1: The Business Plan – Proving Active Operation

Your business plan is the most critical document, serving as the proof that your “rental property” is actually a qualifying business.

• Define the Operating Business: The plan must clearly define the property’s use as an active, full-service operating entity. For a Bed and Breakfast, a boutique hotel, or a managed short-term rental facility, this means detailing the active services provided: daily cleaning, dedicated guest services (check-in/concierge), marketing, and revenue management. This satisfies the Owner-Occupancy Test (51% for existing properties) by proving the entire facility is necessary for the active business.
• Operational Detail: Include organizational charts, detailed staffing plans, marketing strategies, and two years of financial projections demonstrating viability.

Step 2: Eligibility Check – The Non-Financial Criteria

Before a lender reviews your financials, you must meet the SBA’s basic eligibility criteria:

• For-Profit Status: The business must be for-profit and operate (or propose to operate) within the United States.
• Not a Passive Investment: The primary activity cannot be a passive investment. This is why a simple long-term residential landlord is disqualified, while an active hotel owner is qualified.
• Size Standard: The business must meet the SBA’s definition of “small” for its specific industry (NAICS code). For the hospitality sector (NAICS 721110, Hotels/Motels), the size standard is based on average annual receipts. As of the latest standards, a business qualifies if its average annual receipts do not exceed $30 million.
• Business Entity: Can an individual get an SBA loan for rental property? No, but the individual must apply through a business entity (LLC, Corporation, etc.) that will own the business operation and the real estate.

Step 3: Financial Requirements – Proving Repayment Capacity

The lender’s primary concern is repayment. You must demonstrate the financial stability of the existing business (if an acquisition) or the high probability of success (if a startup).

SBA Loan Requirements for Long-Term Rental Income (Cash Flow)

While the SBA requires a personal guarantee and considers personal net worth, the business’s cash flow is the key determinant of loan sizing and approval.

• Debt Service Coverage Ratio (DSCR): This is a pivotal metric. The DSCR measures your cash flow available to cover the new debt service. It’s calculated as Net Operating Income / Total Debt Service. For SBA 7(a) loans, most lenders require a minimum DSCR of 1.15x, with many lenders setting an internal bar at 1.25x or higher for hospitality properties to ensure a buffer against market fluctuations. A higher DSCR allows the lender to size a larger loan.
• Equity/Down Payment: You must provide the minimum required equity injection —typically 10% for a standard business acquisition. However, it often rises to 15% for “special purpose” properties like hotels and new construction.
• Personal Net Worth & Credit: All owners with a 20% or greater stake must provide a full personal guarantee. A minimum personal credit score (typically 680+) and a reasonable personal Debt-to-Income (DTI) ratio are required. The SBA will look for “sufficient equity” on the individual balance sheet, even if a formal net worth test is conducted only for larger 504 loans.

Step 4: The Lender Relationship – Your Competitive Edge

Navigating the stringent requirements and specialized underwriting of hospitality SBA loans is complex.

At HotelLoans.Net, we operate as both a correspondent and a table lender. This dual role means we have the internal capacity to underwrite and fund deals directly. We are also deeply connected to a network of over 1,000 private lenders, investors, brokers, and realtors who specialize in this niche. Our $30$-year track record ensures your application is packaged and presented to the right institution the first time, maximizing your chances of securing the best terms for your hospitality property acquisition.

Documents Needed for SBA Hospitality Property Loan Application (Checklist)

A complete, accurate, and organized application package is the single most effective way to accelerate your SBA loan approval. The Small Business Administration and its lending partners require extensive documentation to verify eligibility, financial health, and the proposed use of the funds. In the hospitality sector, this due diligence is even more rigorous.

The following checklist details the most critical documents you must prepare for an SBA 7(a) or 504 loan for your hotel, motel, or qualifying short-term rental business.

Business & Personal Financials

These documents establish the financial viability and repayment capacity of your business and all principal owners.

• Business Tax Returns: Complete federal tax returns (with all schedules) for the past three years for the operating business (or selling business, if an acquisition).
• Personal Tax Returns: Complete personal federal tax returns (with all schedules) for the past three years for all owners with a 20% or greater equity stake.
• Interim Financial Statements: Current (dated within 90 days of application) Profit & Loss (P&L) statement and Balance Sheet for the business.
• Schedule of Debt: A detailed list of all existing business debts, including creditor, balance, payment, and collateral.
• Personal Financial Statement (SBA Form 413): A detailed summary of individual assets, liabilities, and net worth for each principal owner.
• Source of Equity Injection: Documentation (e.g., bank statements, gift letters) proving the source and availability of your required down payment/equity.

Business Planning & Operations

These documents prove the property is an active business operation, thus satisfying the owner-occupancy rule.

• Detailed Business Plan: A comprehensive plan clearly demonstrating how the property is an active hospitality business (e.g., providing guest services, management, marketing). Include an executive summary, market analysis, and management team experience.
• Financial Projections: At least two years of detailed monthly financial projections (P&L and Cash Flow) with written assumptions, especially crucial for startups or significant expansions.
• Resumes: Professional resumes for all principal owners and key management, highlighting relevant industry experience (e.g., hotel management).
• Franchise Agreement (If Applicable): A copy of the franchise agreement and the franchisor’s disclosure document (FDD).

Real Estate & Transaction Documents

These pertain specifically to the asset being financed.

• Executed Purchase Agreement: The signed contract to purchase the commercial real estate (e.g., the hotel or motel).
• Use of Proceeds Breakdown: A detailed, itemized list of how the loan funds will be spent (purchase price, renovation costs, equipment, working capital).
• Appraisal Report: An independent commercial appraisal of the property. For SBA loans, this must adhere to SBA valuation standards.
• Environmental Assessment: A Phase I Environmental Site Assessment (ESA) is almost always required for commercial property to ensure there are no environmental risks.
• Construction/Renovation Quotes: Written estimates from contractors and construction budgets, if the loan includes funds for new construction or significant renovations.
• Occupancy Verification: Documentation confirming the property’s square footage and the space designated for the owner-occupied business (must be 51% or more for existing).

Legal & SBA-Specific Forms

Mandatory government and entity documentation.

• SBA Form 1919: Borrower Information Form.
• SBA Form 912: Statement of Personal History (for all principals), used for background checks.
• IRS Form 4506-T: Authorization for the lender to request tax transcripts directly from the IRS to verify the tax returns submitted.
• Legal Entity Documents: Articles of Incorporation/Organization, Operating Agreements (LLCs), Bylaws, and any fictitious name statements (DBA).

Government Statistic Focus: The SBA supports businesses nationwide. In Fiscal Year 2024, the SBA 7(a) and 504 programs approved over $22.5 billion in capital for small businesses, demonstrating the government’s strong commitment to supporting entrepreneurs in sectors like hospitality who require real estate financing.

Unlock Your Investment with HotelLoans.Net’s Expertise

The journey to financing a hospitality asset—whether a qualifying short-term rental facility or a 100-room motel—is defined by the complexity of SBA regulations and the depth of your lender’s industry expertise. Securing an SBA loan for real estate investment demands precision, and that is precisely where HotelLoans.Net provides an unparalleled advantage.

The HotelLoans.Net Difference: Your Dedicated Hospitality Finance Partner

We don’t just process paperwork; we underwrite your vision. Our focus is laser-sharp and rooted in the asset class that drives your success.

• Hospitality/Real Estate Focus: We exclusively finance the hospitality and real estate sectors. We understand RevPAR, occupancy rates, flag requirements, and the unique challenges of the hotel and motel industry better than general commercial lenders. We only do what we know.
• Correspondent and Table Lender Status: Our unique position enables us to move quickly and with authority. As a table lender, we have the internal capacity to fund deals directly, often leading to quicker underwriting decisions and faster closings than standard correspondent banks. This direct access streamlines your path to funding.
• 30-Year Underwriting Capability: Our three decades of experience mean we have successfully financed deals through every economic cycle. This rare depth of expertise allows us to structure challenging or specialized deals, ensuring compliance with the stringent requirements of the SBA and other complex financing products.
• The Power of Network: Beyond our internal capacity, we maintain strong relationships with a vast, curated network of over 1,000 private lenders, investors, brokers, and realtors specializing in commercial hospitality debt. If your deal falls outside the SBA’s criteria, we know the exact capital source to pursue.

Industry Insight: The hospitality sector consistently demonstrates a high demand for SBA funding. In Fiscal Year 2024, the Accommodation and Food Services industry received the highest share of SBA 7(a) and 504 loan amounts, securing $5.2 billion (16.7%) of 7(a) funding and $1.5 billion (22.1%) of 504 funding, cementing its status as a top industry supported by the SBA for expansion and acquisition.

Beyond SBA: Full-Service Financing for Every Hospitality Need

While SBA loans offer unmatched terms for owner-occupied purchases, your hospitality project may require a different product at various points in its lifecycle. HotelLoans.Net is your full-spectrum solution provider, ensuring you never have to shop for another lender.

We position your SBA loan as one powerful tool among a toolbox of options. Whether you need rapid funding for a distressed asset via a Bridge Loan or long-term, low-rate stability from a CMBS Loan, we provide the expertise to structure the best deal.

Partnership Opportunities: Broker Referral Programs

We actively seek to partner with real estate brokers, agents, and other commercial intermediaries whose clients require specialized hospitality financing. Referring your client to HotelLoans.Net means placing them with a dedicated expert, increasing your closing certainty, and speeding up your commission payout.

We offer both exclusive and non-exclusive referral programs designed to provide competitive compensation for successful loan placements. When you partner with us, you gain a trusted, transparent lending partner who will handle the complex underwriting while you focus on the deal.

Ready to secure your hospitality investment with confidence?

Click here to submit a preliminary loan request or schedule a free consultation with one of our 30-year underwriting specialists today.

Start Your Hospitality Venture Today

The path to securing government-backed financing for your rental property starts with one critical decision: structuring your venture as an active, owner-occupied business rather than a passive investment.

We have established that the SBA 7(a) and SBA 504 programs are not for traditional residential rentals. Still, they are the gold standard for financing hospitality real estate—including hotels, motels, and actively managed short-term rental businesses. By meeting the crucial 51% owner-occupancy rule and demonstrating strong cash flow through a well-articulated business plan, you unlock access to low down payments, 25-year terms, and highly competitive rates.

Your success depends on partnering with a lender that specializes in navigating these nuances.

The Final Step: Connect with the Experts

At HotelLoans.Net, we leverage our 30 years of underwriting expertise and status as both a correspondent and table lender to provide you with a streamlined, efficient path to funding. Whether you are acquiring your first boutique inn or developing a multi-unit resort, we are ready to apply our industry knowledge to your specific deal.

For Investors Ready to Act

Ready to leverage an SBA loan for your next hospitality investment property? Don’t leave your financing to chance.

Contact HotelLoans.Net today for a free consultation and personalized 30-year underwriting analysis.

For Real Estate Brokers and Intermediaries

Grow your business by partnering with an industry specialist. Ensure your clients secure the best terms and highest closing certainty for their hospitality deals.

Inquire about our exclusive and non-exclusive referral programs now.

FAQs

1Q. Do SBA loans for hotels have a prepayment penalty, and how is it structured?

Answer: Yes, SBA 7(a) loans over $50,000 with terms of 15 years or longer have a prepayment penalty that applies only if the borrower pays off 25% or more of the outstanding principal balance within the first 3 years of the loan. The penalty is tiered: 5% in the first year, 3% in the second year, and 1% in the third year. SBA 504 loans also feature a prepayment penalty that matches the first half of the debenture term (e.g., a 10-year penalty for a 20-year term).

2Q. Are there special SBA requirements for financing a franchised hotel (e.g., Marriott, Hilton)?

Answer: Yes. The SBA maintains a Franchise Directory to ensure that franchise agreements do not violate SBA rules (e.g., by giving the franchisor undue control over the borrower’s operations). A franchised hotel must be listed in the directory or submit its agreement for review. Most lenders also prefer flagged or franchised hotels over independent ones because the brand provides a proven business model and support, reducing the lender’s risk.

3Q. What is the minimum level of prior experience required to secure an SBA loan for a hotel?

Answer: While the SBA does not set a hard minimum, most SBA lenders (PLP lenders) specializing in hospitality require the principal owner/operator to have at least 2-3 years of direct, relevant experience managing a similar hotel property. Lenders view a track record of success in the industry as a critical factor in mitigating the risk of a highly cyclical business like a hotel.

4Q. Can I finance the SBA loan closing costs and guarantee fees within the loan amount?

Answer: Yes, this is one of the significant benefits of SBA financing, particularly with the 7(a) program. The SBA allows most eligible soft costs and closing expenses—including the SBA Guarantee Fee, appraisal costs, environmental reports, and packaging fees—to be rolled into the total loan amount, reducing the borrower’s upfront cash requirement.

5Q. For an SBA 504 loan, do I make one payment or two different payments each month?

Answer: You make two separate monthly payments. The SBA 504 loan is structured into two distinct components: a 50% First Lien Loan from the private lender (bank) and a 40% Second Lien Debenture from the Certified Development Company (CDC). You pay the bank for their 50% portion and the CDC (which services the loan on behalf of the SBA) for their 40% portion.