Business Real Estate Loan Rates in 2026: SBA 504, SBA 7(a) and Conventional Commercial Loans Compared

If your business pays rent and you're thinking about buying the building, the rate on the loan matters more than almost anything else. This guide is for owner-operators — shop owners, contractors, clinics, manufacturers, restaurants — comparing business real estate loan rates in the United States. You'll see how SBA 504, SBA 7(a) and conventional bank loans are priced, what benchmarks they follow, the loan-to-value (LTV) and debt service coverage (DSCR) rules lenders apply, and a worked example of a $1.6 million purchase financed three ways.

Quick answer

Business real estate loans are priced as a benchmark plus a spread. SBA 504 loans fix the CDC portion off the 10-year Treasury (5.28% on 7 Oct 2026); SBA 7(a) loans usually float off prime (7.00%), capped by SBA; bank loans are quoted case by case. Expect lenders to want 10%–25%+ down and a DSCR of at least 1.15x.

• SBA 504: 25-year debenture effective rate 6.54% (September 2026 pricing, per a CDC), with as little as 10% of project cost down

• SBA 7(a): up to $5 million, terms to 25 years for real estate; loans over $350,000 capped at prime + 3%

• Owner occupancy required: 51% of an existing building, 60% of new construction

• Bank loans can't exceed the federal supervisory LTV limit of 85% for improved property — most banks lend less

How business real estate loan rates are set

No lender sets your rate from scratch. Each one starts from a market benchmark and adds a spread for its costs, risk and profit. Knowing which benchmark a loan follows tells you which way your rate is likely to move.

• Prime rate. Banks' base lending rate, which moves with the Federal Reserve's policy rate. The Fed's H.15 data put prime at 7.00% on 2 October 2026. Most variable SBA 7(a) loans and many bank lines are "prime plus" something.
• Treasury yields. Long-term fixed loans follow government bond yields. The 10-year Treasury was 5.28% and the 5-year was 5.03% on 7 October 2026. SBA says 504 rates are pegged to an increment above the 10-year Treasury; many banks price five- and ten-year fixed commercial mortgages off the matching Treasury or swap rate.
• Your spread. This is where you have influence. Lenders charge less to borrowers with strong cash flow, a large down payment, an easy-to-sell building, a long operating history and good personal credit.

Rates in this guide are dated snapshots. Benchmarks move daily, 504 debentures are priced monthly, and every bank quote is individual. Use the figures here to judge whether a quote is reasonable, then get written term sheets from at least two or three lenders.

Notice that prime and the 10-year yield don't always move together. When the Fed cuts short-term rates but long-term yields stay high, variable prime-based loans get cheaper faster than fixed Treasury-based ones — and the reverse happens when the Fed raises rates. That's why the "best" loan type changes from year to year.

SBA 504 loans: fixed rates for owner-occupied property

The 504 program is built for buying, building or renovating long-term fixed assets — mostly real estate. SBA describes it as long-term, fixed-rate financing made through Certified Development Companies (CDCs), nonprofit lenders certified and regulated by SBA.

A typical 504 project has three pieces, according to SBA's lender guidance:

The standard SBA 504 structure

50%

Bank first mortgage

Senior lien; bank sets rate and term

40%

CDC loan

Junior lien, backed by a 100% SBA-guaranteed debenture

10% of project cost

Your equity

15% of project cost for a new business or special-purpose property

$5.5 million

Maximum 504 loan

SBA 504 page

How the 504 rate works. The CDC portion is funded by selling a debenture to investors. CDCs say pricing happens monthly — on the first Thursday of the first full week of the month, with funding the following Wednesday. Once your debenture is sold, the rate is fixed for the full 10, 20 or 25 years. SBA says total fees come to roughly about 3% of the debenture and can be financed into the loan.

Recent 504 rates. Michigan CDC's published "current rates" — the September 2026 pricing — were 6.54% for 25 years, 6.53% for 20 years and 6.60% for 10 years. Michigan CDC notes the effective rate includes program fees. That's roughly 1.25 percentage points over the 10-year Treasury at the time. The bank's 50% first mortgage has its own rate, set by the bank and often fixed for a shorter period than the CDC loan.

What a 504 can and can't fund. SBA lists the purchase, construction or renovation of buildings or land; long-life machinery (at least 10 years of remaining life); and certain qualified debt refinancing. It can't fund working capital, inventory, or "speculation or investment in rental real estate". CDCs also apply job-creation or public-policy goals — typically one job per $95,000 of SBA debenture ($150,000 for small manufacturers).

Who's eligible. SBA requires an operating, for-profit US business that's small under SBA size rules. One alternative size test lets a business qualify with tangible net worth of no more than $20 million and average net income after tax of no more than $6.5 million. Our SBA loan requirements guide explains the size, credit and guarantor rules in detail.

SBA 7(a) loans for real estate

The 7(a) program is SBA's general-purpose guarantee. A bank or other SBA lender makes the loan, and SBA guarantees part of it — 85% for loans up to $150,000 and 75% above that. The maximum is $5 million. For real estate, SBA allows maturities up to 25 years, including extensions.

Rate caps. SBA lets lenders and borrowers negotiate the rate, but not above SBA maximums. On SBA's 7(a) page, the variable-rate ceilings over the base rate are:

Caps from SBA; the third column applies the prime rate of 2 October 2026. Actual rates can be lower.

Most real estate deals are well over $350,000, so the effective ceiling for a building loan is prime plus 3%. A 7(a) rate is usually variable and resets with prime — usefully cheaper if the Fed cuts, more expensive if it raises.

When 7(a) beats 504. A 7(a) can combine the building with equipment, working capital, a business acquisition or moving costs in one loan. It can also close faster because there's one lender rather than a bank plus a CDC. The trade-offs: the guarantee fee is charged on the guaranteed portion — for loans over $1 million it is 3.5% of the guaranteed portion up to $1M + 3.75% above $1M — and the rate usually floats. Our SBA 7(a) loan guide covers fees and the application in depth.

Owner occupancy applies to both. Under 13 CFR 120.131, if SBA financing (7(a) or 504) buys or renovates an existing building, your business must occupy at least 51% of the rentable space and may lease out the rest. For new construction, you must occupy at least 60% immediately, may permanently lease up to 20%, and must plan to occupy the remainder within ten years. Many owners hold the building in a separate real estate company that leases 100% to the operating business; the regulation allows this "eligible passive company" setup as long as the operating company meets the same occupancy tests.

Conventional commercial real estate loans from banks

A conventional commercial mortgage has no government guarantee. Banks, credit unions and insurance companies make them on their own credit standards. They're often faster and simpler than SBA loans, and they're the only option for investment property you won't occupy.

Down payment and LTV. Federal banking agencies publish supervisory loan-to-value limits that banks' internal limits shouldn't exceed. The limits are 65% for raw land, 75% for land development, 80% for commercial construction and 85% for improved property. Those are ceilings, not targets — banks are expected to set their own, lower limits by property type. In practice that means a conventional purchase loan normally needs a noticeably bigger down payment than a 504.

Rate structure. Bank commercial mortgages are commonly fixed for a set period, then either reset or come due as a balloon payment before the loan is fully paid off. A loan might be amortized over 20 or 25 years but mature sooner, so you'd refinance or pay the balance at that point. Read the term sheet for the fixed-rate period, the maturity date, any rate-reset formula and the prepayment penalty — these often matter more than a quarter-point difference in the headline rate.

Investment property. If you'll lease most of the building to other tenants, you're an investor. Lenders then underwrite the property's rental income — its net operating income and cap rate — rather than your business's cash flow. Expect stricter LTV and coverage requirements than for owner-occupied loans.

SBA 504 vs SBA 7(a) vs conventional — at a glance

Feature	SBA 504	SBA 7(a)	Conventional bank loan
Typical down payment	10% of project cost (15% of project cost new business or special purpose)	Often about 10%; lender-set	Lender-set; limited by supervisory LTV caps
Rate type	CDC part fixed for full term; bank part set by bank	Usually variable off prime; fixed allowed	Often fixed for a period, then reset or balloon
Rate benchmark	10-year Treasury (5.28%)	Prime (7.00%), capped by SBA	Treasury, swap or prime, lender's choice
Longest term	25 years	25 years for real estate	Lender-set; often shorter maturity than amortization
Owner occupancy	51% existing / 60% new	Same as 504	Not required
Can include working capital	No	Yes	Usually a separate facility
Fees	About about 3% of the debenture, financed	SBA guarantee fee + lender fees	Lender origination, appraisal, legal

Typical down payment

SBA 504

10% of project cost (15% of project cost new business or special purpose)

SBA 7(a)

Often about 10%; lender-set

Conventional bank loan

Lender-set; limited by supervisory LTV caps

Rate type

SBA 504

CDC part fixed for full term; bank part set by bank

SBA 7(a)

Usually variable off prime; fixed allowed

Conventional bank loan

Often fixed for a period, then reset or balloon

Rate benchmark

SBA 504

10-year Treasury (5.28%)

SBA 7(a)

Prime (7.00%), capped by SBA

Conventional bank loan

Treasury, swap or prime, lender's choice

Longest term

SBA 504

25 years

SBA 7(a)

25 years for real estate

Conventional bank loan

Lender-set; often shorter maturity than amortization

Owner occupancy

SBA 504

51% existing / 60% new

SBA 7(a)

Same as 504

Conventional bank loan

Not required

Can include working capital

SBA 504

No

SBA 7(a)

Yes

Conventional bank loan

Usually a separate facility

Fees

SBA 504

About about 3% of the debenture, financed

SBA 7(a)

SBA guarantee fee + lender fees

Conventional bank loan

Lender origination, appraisal, legal

Lender requirements: LTV, DSCR and personal guarantees

Whatever the program, lenders test two numbers.

Loan-to-value (LTV) is the loan divided by the lower of the purchase price or appraised value. A $1.2 million loan on a $1.6 million building is 75% LTV. Lower LTV means more protection for the lender and usually a better rate.

Debt service coverage ratio (DSCR) is the cash flow available to pay debt divided by the annual loan payments. For an owner-occupied building, lenders typically start from your business's earnings and add back the rent you'll no longer pay. SBA's standard operating procedure sets a minimum DSCR of 1.15x for most loans (1.10x for 7(a) small loans). Banks set their own minimums on conventional loans and often want a bigger cushion.

Personal guarantees. SBA requires guarantees from owners of 20% or more of the business. Most banks ask for personal guarantees on small-business real estate loans too, especially when the building is held in a separate LLC.

Documents to expect. Three years of business tax returns (or projections for newer businesses), interim financial statements, personal financial statements, a debt schedule, the purchase contract, and — for SBA loans — the SBA forms the lender gives you. The lender orders the appraisal and an environmental review, which you usually pay for.

Worked example: a $1.6 million building financed three ways

A family-owned HVAC contractor in Ohio pays $11,500 a month in rent. It wants to buy a $1,500,000 light-industrial building and spend $100,000 on renovation, a $1,600,000 project. The business has operated for 12 years and will occupy the whole building. Its cash flow available for debt service — after adding back the rent it will stop paying — is $180,000 a year.

The 504 debenture rate below is the September 2026 published figure. The bank rates are assumptions for illustration only, not quotes: we use 7.25% for bank loans (about two percentage points over the 5-year Treasury) and the SBA 7(a) cap of 10.00%. All loans are shown on 25-year amortization.

Payments calculated with standard amortization. 504 figures exclude financed fees; 7(a) shown at the SBA maximum rate for loans over $350,000 with prime at 7.00%.

What this shows:

• The 504 keeps $240,000 more cash in the business than the conventional loan, with comfortable coverage. Its 40% CDC piece is fixed for 25 years, so more than a third of the debt is protected from rate rises.
• The 7(a) at its ceiling just clears 1.15x. A negotiated rate below the cap would help, and a 7(a) could also roll in equipment or working capital. But every prime-rate move changes the payment. The SBA guarantee fee on the $1,080,000 guaranteed portion would be about $38,000 under the current fee schedule.
• The conventional loan has the lowest payment but needs $400,000 down — cash many growing businesses would rather keep for equipment and staff. Check whether the fixed rate lasts the whole term or ends in a balloon.

Run your own numbers with the loan payment calculator and see how amortization changes the interest you pay in our amortization guide.

Try it — the CDC portion of a 504 loan

Loan AmountInterest Rate (p.a.)Tenure

Loan Amount₹6,40,000.00

Total Interest₹6,61,200.80

Total Payable₹13,01,200.80

Number of EMIs300

Monthly EMI₹4,337.34

Open the full EMI Calculator (PDF, save, compare)

Fees, closing costs and the full cost of borrowing

The rate is only part of the cost. Budget for:

• SBA fees. About about 3% of the debenture of the debenture on a 504 (financed), and the guarantee fee on a 7(a), which depends on loan size and maturity.
• Bank fees. Origination or packaging fees, plus the bank's legal costs.
• Third-party reports. Appraisal, environmental review (often a Phase I), survey and title insurance.
• Prepayment penalties. Many fixed-rate commercial loans charge a fee if you repay early; SBA loans have their own rules for some prepayments. Ask in writing.
• Reserves. Lenders like to see cash left after closing. Draining every dollar into the down payment can sink an otherwise approvable loan.

Compare offers on total cost over the period you expect to hold the loan, not just the headline rate. A slightly higher rate with no prepayment penalty can beat a cheaper loan you'd have to pay a big fee to refinance.

Common mistakes and how to avoid them

Comparing undated rates. A rate on a website with no date or benchmark is a marketing number. Ask each lender: what's the index, what's the spread, is it fixed and for how long, and what are the fees?

Ignoring occupancy rules. Buying a building twice the size you need and leasing most of it out won't work with SBA money. If you'll occupy less than 51%, plan for a conventional loan.

Underestimating special-purpose property. Buildings designed for one use — a car wash, a bowling alley, a hotel — are harder for lenders to resell. The 504 program asks for 15% of project cost equity on special-purpose property (more if you're also a new business), and banks typically lend a lower share.

Using personal funds that aren't documented. Lenders trace down-payment money. Large unexplained deposits slow approval; keep statements showing where the cash came from.

Forgetting the balloon. If your conventional loan matures in ten years on a 25-year schedule, you'll owe a large balance at maturity. Plan to refinance, and remember the rate then could be higher.

Assuming variable rates only fall. A prime-based 7(a) payment rises with every Fed increase. Stress-test your DSCR with prime two points higher before you sign.

Steps to get a business real estate loan

From lease to ownership

1. 1

   Decide what you can afford

   Work out the cash flow available for debt service, including the rent you'll stop paying. Aim for coverage comfortably above 1.15x.

2. 2

   Pick the program that fits

   Owner-occupied and want a fixed rate with low equity? Look at a 504. Need working capital or equipment in the same loan? Consider a 7(a). Investor or need speed? Conventional.

3. 3

   Get pre-qualified

   Talk to a CDC and two or three banks. Use SBA's Lender Match to find SBA lenders in your area.

   SBA Lender Match
4. 4

   Compare written term sheets

   Line up rate, index, spread, fixed period, maturity, fees and prepayment terms side by side.

5. 5

   Sign the purchase contract with a financing contingency

   Give yourself time for appraisal, environmental review and SBA approval.

6. 6

   Close and track your covenants

   Many loans require annual financial statements and a minimum DSCR. Diary the reporting dates.

Official sources

• SBA 504 loansUses, terms, fees and how to find a CDC
• SBA 7(a) loansMaximum interest rates and loan terms
• SBA lender terms and program comparison504 structure, 7(a) real estate maturities
• 13 CFR 120.131 — owner occupancy51% / 60% occupancy and leasing limits
• Interagency supervisory LTV limitsMaximum LTV by property type
• Prime rate data (H.15 via FRED)Daily prime rate
• 10-year Treasury yield (H.15 via FRED)Benchmark for 504 and fixed bank loans

What to do next

Before you talk to lenders, calculate your DSCR at today's rates and at rates two points higher, and decide how much cash you can put down while keeping a reserve. Then read the SBA loan requirements so your paperwork is ready, and if you're weighing a property you'd partly lease out, check its income with our cap rate guide and the rental yield calculator.

This is general information, not legal or financial advice — confirm on the official source or with a professional.

Frequently asked questions

What are business real estate loan rates right now?

They're built on benchmarks. In early October 2026 the prime rate was 7.00% and the 10-year Treasury yield was 5.28%. SBA 504 25-year debentures priced in September 2026 at an effective 6.54%, per a certified development company. SBA 7(a) real estate loans over $350,000 can't exceed prime plus 3%. Bank loans are quoted individually.

How much down payment do I need for a commercial property loan?

With an SBA 504 loan, usually 10% of project cost, rising to 15% of project cost for a new business or a special-purpose building (20% if both). SBA 7(a) loans often need about 10% too. Conventional bank loans usually need more, because banks can't lend above federal supervisory loan-to-value limits and most set tighter internal caps.

What is the difference between an SBA 504 and a 7(a) loan for real estate?

A 504 splits the project between a bank first mortgage (about 50%), a CDC loan backed by an SBA debenture (about 40%) and your equity (at least 10%). The CDC part carries a fixed rate for up to 25 years. A 7(a) is a single bank loan with an SBA guarantee, often variable, up to $5 million, and can also cover working capital.

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

No. SBA 504 and 7(a) loans are for owner-occupied property. Your business must occupy at least 51% of an existing building, or 60% of a new one, under 13 CFR 120.131. Pure rental or speculative real estate needs a conventional or investor loan.

What DSCR do lenders want for a business property loan?

SBA's standard operating procedure sets a minimum debt service coverage of 1.15x for most 7(a) and 504 loans. Banks set their own minimums for conventional loans and many want more cushion. DSCR is the cash flow available for debt service divided by total annual loan payments.

Are commercial real estate loan rates fixed or variable?

Both exist. The CDC portion of a 504 is fixed for its whole term. SBA 7(a) loans can be fixed or variable, and many are variable and tied to prime. Bank commercial mortgages are often fixed for a set number of years and then reset or balloon. Ask how the rate is set, when it can change and what prepayment penalty applies.

Sources & verification

Figures on this page were checked against the sources below when it was last reviewed on 9 October 2026. Each rate and limit is stored once with its own official source and review date, and official update channels are monitored daily so changes are picked up. How we verify

1. 1.504 loans — U.S. Small Business Administration · accessed 9 October 2026
2. 2.7(a) loans — U.S. Small Business Administration · accessed 9 October 2026
3. 3.Lender programs: terms, conditions and eligibility — U.S. Small Business Administration · accessed 9 October 2026
4. 4.13 CFR 120.131 — Leasing part of new construction or existing building — eCFR (National Archives) · accessed 9 October 2026
5. 5.12 CFR Part 34, Subpart D, Appendix A — Interagency real estate lending guidelines — eCFR (National Archives) · accessed 9 October 2026
6. 6.Bank prime loan rate (DPRIME) — Federal Reserve Bank of St. Louis (H.15 data) · accessed 9 October 2026
7. 7.10-year Treasury constant maturity (DGS10) — Federal Reserve Bank of St. Louis (H.15 data) · accessed 9 October 2026
8. 8.5-year Treasury constant maturity (DGS5) — Federal Reserve Bank of St. Louis (H.15 data) · accessed 9 October 2026
9. 9.Rates and calculator — current SBA 504 rates — Michigan Certified Development Corporation · accessed 9 October 2026
10. 10.SBA 504 pricing and funding dates — TMC Financing (certified development company) · accessed 9 October 2026