If you're buying commercial real estate in Louisville or Southern Indiana, the financing conversation almost always comes down to one question: SBA 504 or SBA 7(a)? Both are U.S. Small Business Administration loan programs built to help owner-operators buy real estate for their own business, and both come up constantly because conventional bank financing for owner-occupied commercial property is hard to get on favorable terms without one.

SBA 504: the standard for owner-occupied purchases

The 504 program is built specifically for buying, building, or expanding owner-occupied commercial real estate (and heavy equipment). It typically works as a three-part structure: a conventional first-mortgage lender covers about 50% of the project, a Certified Development Company (CDC) backed by the SBA covers up to 40% with a long-term, fixed-rate loan, and the borrower puts in as little as 10% — existing businesses of at least two years on a standard project. Startups, single-purpose properties (hotels, gas stations, self-storage), and a few other cases typically require 15-20% down.

• Loan size: the CDC portion generally runs $250,000 to $30 million.
• Rate: fixed for the life of the loan, set monthly off Treasury benchmarks — the main reason owner-operators pick 504 over 7(a) for real estate.
• Use: purchasing an existing building, ground-up construction, or expanding a building you already occupy.
• Eligibility: generally tangible net worth under $20 million and average net profit after taxes under $6.5 million over the prior two years.

SBA 7(a): more flexible, priced differently

The 7(a) program is the SBA's general-purpose loan — it can finance real estate, but also working capital, equipment, business acquisition, and debt refinancing in a single loan. That flexibility comes at a cost: 7(a) real estate loans are predominantly variable-rate, tied to the prime rate (though some fixed-rate options exist), and the loan ceiling is lower.

• Loan size: $125,000 to $5 million.
• Rate: mostly variable, prime-rate-indexed; the SBA caps the maximum spread by loan size — as of early 2026, loans over $350,000 are capped around prime + 3.0%, with the allowed spread widening as the loan size shrinks.
• Down payment: often 10%, sometimes 15%+ depending on the lender and deal, usually without the extra outside collateral a 504 loan tries to avoid.
• Use: buying or expanding a business (real estate included), refinancing existing business debt, or working capital.

What lenders look for beyond the program rules

Program eligibility is only half of underwriting. In practice, lenders on both 504 and 7(a) deals want to see at least two years of business financials showing the debt is serviceable from operating cash flow, a debt-service coverage ratio comfortably above 1.0x (many lenders want 1.15-1.25x or better), a clear plan for how the space will be used, and — for single-purpose property like hotels, gas stations, self-storage, or medical space — often a larger down payment or additional guarantees.

What we look at with you

Before you talk to a lender, we walk through the basics that shape which program fits: how long the business has been operating, whether the property is majority owner-occupied (SBA rules generally require at least 51% owner-occupancy for an existing building, 60% for new construction), what the debt-service coverage looks like against the purchase price, and whether the asset itself — office, retail, industrial, medical, or land — carries any financing quirks specific to that use.

Buying commercial real estate with financing in Louisville & Southern Indiana

SBA financing shows up across every asset class we work in. See the full office investment page, retail investment page, industrial & warehouse page, or Southern Indiana commercial page for what's moving in each market, or head back to the commercial real estate hub for the full picture.

Frequently asked questions

Can I use an SBA loan for an investment property I won't occupy myself?

No. Both 504 and 7(a) require the borrower's own business to occupy the majority of the space (51% for an existing building, 60% for new construction). Pure investment properties need conventional commercial financing instead.

Which program has the better rate?

504 loans are fixed for the life of the loan, which is why most owner-operators prefer them for real estate specifically. 7(a) loans are predominantly variable, tied to the prime rate, though some fixed-rate 7(a) options exist.

How much down payment do I actually need?

As little as 10% on a standard 504 deal for an established business. Startups, single-purpose properties, and some 7(a) deals often require 15% or more.

Can I combine SBA financing with a 1031 exchange?

SBA loans are for owner-occupied business real estate, while 1031 exchanges defer capital gains on investment property — they solve different problems and generally don't combine on the same transaction, but nothing stops you from using SBA financing on one purchase and a 1031 exchange on another.

Do SBA loan limits differ between Kentucky and Indiana?

No — SBA loan limits and program rules are federal and identical on both sides of the river. What differs is the property tax, zoning, and incentive landscape, which is where a dual-licensed agent matters.

What if my business is too new to qualify?

Lenders generally want at least two years of financials. Newer businesses can still explore 7(a) financing with a stronger personal guarantee and down payment, or conventional bank financing with different collateral requirements.