Reviewed by Craig Hoebing, Capital Market Funds, LLC - CBK-2007014 - Commercial Mortgage Banker · Updated October 2026
Two commercial loans can use the same building and still be different products. In an owner-user loan, the operating business occupies the property and the business's cash flow is a central source of repayment. In an investor loan, the owner leases the property to tenants and the rent is the source of repayment. 13 CFR 120.131, opened on the eCFR on October 30, 2026, draws the occupancy line for SBA 7(a) and 504 financing. For acquisition, renovation, or reconstruction of an existing building, the borrower may permanently lease up to 49 percent of the rentable property if the borrower permanently occupies and uses at least 51 percent. If an eligible passive company leases the whole building to one or more operating companies, those operating companies together must meet the same test. For new construction, paragraph (a) allows a permanent lease of up to 20 percent only if the borrower occupies at least 60 percent immediately and has a plan to occupy more of the rest over three and ten years. Those percentages are the regulation's. They are not a quote of proceeds.
SBA's 504 overview, opened the same day, says loans cannot be made to businesses engaged in passive or speculative activities, and that a 504 loan cannot be used for speculation or investment in rental real estate. A sponsor who will not occupy the building is describing the investor shelf: bank, life company, CMBS, or another conventional source, arranged with that source. The Arizona owner-user page is Arizona owner-occupied. The investor page is Arizona investment property. This note is commercial real estate. It is not a loan for a house the borrower will live in, and it is not a one-to-four-unit consumer mortgage.
Who signs, and who this office is not
An SBA loan is made by an SBA lender. A 504 project also includes a certified development company. Capital Market Funds arranges the introduction and the comparison. It is not an SBA lender and not a CDC. The business's ability to pay, when the owner occupies the building, is part of global cash flow. The lease, when strangers occupy the building, is rent roll and trailing twelve.
Capital Market Funds is not a Fannie Mae DUS lender. The office is 7373 E Doubletree Ranch Rd #255, Scottsdale, AZ 85258. The phone is (480) 495-8072. Capital Market Funds, LLC - CBK-2007014 - Commercial Mortgage Banker and NMLS 1445066. This note is general information. It is not tax advice, legal advice, or an appraisal. A CPA, an attorney, or the other professional named in the note decides how the rule applies to a given property.
Sources
Questions
- What occupancy does 13 CFR 120.131 require for an SBA loan on an existing building?
- The borrower must permanently occupy and use at least 51 percent of the rentable property and may permanently lease up to 49 percent. An eligible passive company and its operating companies are held to the same split. Confirm the rule in effect on the application day.
- Is the new-construction occupancy test the same 51 percent?
- No. Paragraph (a) requires the borrower to occupy at least 60 percent at the start, limits a permanent third-party lease to 20 percent, and requires a plan to occupy additional space. Do not apply the existing-building sentence to a ground-up project.
- Can a landlord who will not occupy the building use SBA 504 anyway?
- SBA's 504 overview says the program cannot be used for speculation or investment in rental real estate. That request is an investor commercial loan. An SBA lender decides eligibility. We are not that lender.
- Does this page cover a home the buyer will live in?
- No. Owner-user here means a business occupying commercial real estate. A house the borrower will occupy is outside this note.