SBA 7(a) and 504 in Arizona: one guaranteed lender versus a CDC debenture

Arizona owners who occupy their building get offered two SBA shapes that are not interchangeable. SBA describes 7(a) as a loan made by a participating lender, with an SBA guarantee, that can include real estate and also working capital, equipment, or a business acquisition. SBA describes 504 as a long-term, fixed-rate financing program delivered with a certified development company, typically for major fixed assets such as buildings, and structured so a private lender holds a first lien while the CDC's debenture sits behind it. Arizona Capital Source, a CDC with Tucson and Phoenix offices, describes that same 504 pairing on its own site: bank first, CDC second. Capital Market Funds is neither the 7(a) lender nor the CDC.

The practical split in Arizona is purpose. A dentist buying a practice and the building, who also needs working capital, is usually a 7(a) conversation because one lender can wrap operating needs into the guaranteed loan. A manufacturer buying a shop it will occupy, with equipment as a fixed asset and no need to finance payroll inside the real estate loan, is the fact pattern CDCs built 504 for. Neither sentence is an eligibility ruling. The SBA lender or the CDC decides. Our role is to arrange the introduction and to stop a sponsor from spending a quarter in the wrong stack. The 7(a) arrangement page is Arizona SBA 7(a). The 504 page already on the site is Arizona SBA 504.

Occupancy, collateral, and what neither program will do

Both programs are owner-user tools. SBA's 7(a) real-estate materials publish an occupancy floor: at least 51 percent of an existing building and at least 60 percent for new construction. 504 is likewise aimed at property the operating company occupies, not at a landlord's multi-tenant investment. If you are buying a leased retail center you will not occupy, stop. That file is a conventional mortgage, described on Arizona owner-occupied only when you do occupy it, and on the ordinary acquisition pages when you do not. Investor property does not become 504 because a CDC brochure was in the data room.

Collateral follows the structure. A 7(a) lender has one loan and will secure it with the real estate and often with business assets and a guaranty. A 504 project has two liens: the bank's first and the CDC debenture. Personal guaranties are the SBA lender's and the CDC's requirement, not a waiver we can advertise. We do not quote a rate, a fee, or a loan-to-cost for either program. SBA publishes a maximum 7(a) amount of $5 million. That cap is not a proceeds offer.

How to choose before anyone orders an appraisal

Write down three facts: the percentage of the building the operating company will occupy, whether the uses of proceeds include working capital or a business purchase, and whether you want one lender or you can live with a bank plus a CDC. If working capital or an acquisition of the business is in the sources and uses, start with 7(a). If the uses are the building and long-lived equipment and you can occupy it, ask a CDC and a bank whether 504 is cleaner. If a conventional bank will do the loan without SBA and the prepay is acceptable, that may be simpler still. We compare those paths. We do not bind any of them.

Arizona's SBA district office lists Phoenix and Tucson locations. That is SBA's map. It is not our branch list. License on this firm remains Arizona commercial mortgage banker CMB-1047342, Craig Hoebing, NMLS 1445066. Nothing on the transactions list is labeled 7(a) or 504, and we will not relabel a conventional card to illustrate a program.