Most business owners come to us asking whether they qualify for an SBA loan. That is almost never the real question. The Small Business Administration does not lend money. Banks do, and the SBA guarantees part of what the bank lends, which is what makes a longer term or a smaller down payment possible. So the question that actually decides your deal is narrower and more useful: which program fits what you are about to buy.
Get that right and the structure follows. Get it wrong and you spend six weeks assembling a file for the wrong program.
Start With What You Are Buying
Here is the rule that resolves most cases in one sentence. If the money is going into something that will still be standing in twenty years, look at 504. If it is going into the operating business, look at 7(a).
That is not a technicality. The two programs were built for different jobs. The 504 program exists to put fixed assets on your balance sheet, so it is aimed at real estate and long-lived machinery. The 7(a) program is the general purpose tool, and it can cover working capital, equipment, real estate, an acquisition, and certain refinancing, sometimes inside a single loan.
Below is what that looks like against the purchases business owners actually bring us.
Buying the Building You Already Rent
This is the clearest 504 case there is, and it is the most common one we see. You have been leasing a building for years, the landlord is ready to sell, and the payment you would make as an owner is close to the rent you already pay.
The 504 structure is built for exactly this. Roughly half the project comes from the bank, roughly 40 percent comes from a Certified Development Company, and you contribute around 10 percent as equity. A Certified Development Company is a community-based nonprofit that promotes economic development in its region, certified by the SBA, and it funds its portion on a long-term fixed structure alongside the bank's piece.
The practical effect is the down payment. A conventional commercial mortgage typically asks for a good deal more equity than this structure does. For an owner whose cash is tied up in inventory and receivables, that difference is often what decides whether the purchase happens this year or not at all.
One qualifier that matters and catches people out: 504 is for property your business will occupy. It is not for buying rental property as an investment. The SBA states plainly that 504 cannot be used for "speculation or investment in rental real estate."
If you are weighing this, we wrote separately about buying your own building, and a lender can run the rent-versus-own math on your actual numbers. Talk with a business lender before you sign a purchase agreement, not after.
Building, Expanding, or Renovating
Same program, same reasoning. The 504 program covers the purchase, construction or renovation of existing buildings or land. A manufacturer adding a bay, a clinic converting a shell space, a distributor building out a new facility all sit in the same lane as the owner buying the building they rent.
Construction adds moving parts that a purchase does not have: a budget, a draw schedule, a contractor, and an appraisal on a building that does not exist yet. None of that changes the program. It changes how early you should start the conversation.
Buying the Business Itself
This one goes to 7(a), and it is where the guarantee earns its keep.
A business acquisition usually involves goodwill. You are paying for a customer list, a trained crew, a name people in town recognize, and a phone that rings. Conventional lenders are generally not enthusiastic about lending against goodwill, because there is nothing to repossess. The 7(a) program can finance it, and it can put real estate and working capital into the same loan so you are not stacking three facilities to close one deal.
Two things to know before you get attached to a purchase price.
First, a complete change of ownership carries an equity injection requirement, currently a minimum of 10 percent of total project costs under the SBA's Standard Operating Procedure. Seller financing can count toward part of that, but only if the seller note sits on full standby, and it can cover no more than half. These provisions have been revised more than once recently, so confirm the current requirement with your lender before you build a model around it.
Second, the number people forget is working capital. A business that changes hands still has to make payroll in month one. Financing the purchase price to the dollar and leaving nothing to operate on is the most common self-inflicted wound in an acquisition.
More detail sits on our business acquisition loan page. If you have a letter of intent in hand, or you are close, talk with a business lender now rather than at the end of diligence.
Buying Equipment
Here the answer genuinely depends, and there is a bright line you can apply yourself.
The 504 program covers long-term machinery and equipment with, in the SBA's words, "a useful remaining life of a minimum of 10 years." A press, a production line, a piece of infrastructure your operation is built around. If the asset will outlive the loan and then some, 504 is worth pricing.
Everything shorter goes to 7(a), which covers purchasing and installing machinery and equipment, and which the SBA has recently expanded to name AI-related expenses among eligible uses.
The test is not what the equipment costs. It is how long it lasts. Vehicles, computers, and anything you expect to replace inside a decade generally belong in 7(a) regardless of price.
Working Capital, Inventory, and a Contract Bigger Than You Are
7(a), and only 7(a). The SBA is explicit that 504 funds cannot be used for working capital or inventory.
The situation we see most often is a good problem. You win a contract larger than anything you have run before, and now you need to buy materials and add people months before the customer pays you. The business is healthy. The balance sheet just has not caught up to the opportunity.
That gap is what 7(a) working capital is for, and it is worth a conversation before you sign the contract rather than after, because the terms of the contract itself affect how the financing gets structured.
Refinancing Existing Business Debt
Usually 7(a), which lists refinancing current business debt among its approved uses. The 504 program can refinance qualified debt in defined circumstances, which is a narrower door and a real one.
The honest framing is that refinancing is rarely about the debt. It is about cash flow. Stretching an obligation over a longer term lowers the monthly payment, and money not going to debt service is money that can go to payroll or the next hire. Whether that trade makes sense depends on your numbers, not on the program.
When the Answer Is Neither
Sometimes it is. Two alternatives are worth knowing about.
The first is the Minnesota Loan Guarantee Program, a state program run through the Department of Employment and Economic Development, and Security Bank & Trust Co. is an enrolled lender. The state guarantees up to 80 percent of principal, with a maximum guarantee of $800,000. Funds are targeted to Minnesota businesses with fewer than 500 employees and can only go to businesses with fewer than 750, counted across the parent company and all locations whether or not those locations are in Minnesota. It covers startup costs, working capital, equipment, inventory, and the purchase, construction, renovation or tenant improvement of a place of business, along with tangible and intangible assets other than goodwill. DEED makes no loans directly. Enrolled lenders do.
It is smaller and simpler than a federal SBA file, and most business owners have never heard of it. Ask about it by name.
The second is a conventional loan. If your business has the cash flow, the equity, and the collateral, a conventional structure can be faster and carries less paperwork. Our small business loans page walks through the conventional structures alongside the SBA programs. An SBA program is a tool for bridging a specific gap. When there is no gap, you do not need the tool, and a lender should tell you so.
The Rule That Changed in July, and Why Order Now Matters
This is the most consequential change to the two programs in years, and it turns program choice into a sequencing decision.
Until this summer, 7(a) and 504 shared a single cumulative ceiling. Borrowing on one reduced what you could borrow on the other. Effective July 4, 2026, the SBA decoupled them. In the agency's own words, qualified borrowers who secure a 7(a) loan first may access up to $5 million through the 7(a) program and up to $5 million through the 504 program, for a combined total of $10 million.
Read that sentence carefully, because the order is doing real work. The phrase is "secure a 7(a) loan first." For a business with both an operating need and a building in front of it, the sequence you follow now changes how much total financing is available to you. Doing the same two deals in the other order can leave capacity on the table.
This is not a detail to discover after the first loan closes. If there is any chance a second project is coming inside a few years, say so at the first conversation, and let your lender sequence the two deals deliberately. That is a fifteen minute call that can change what your business is able to borrow, and it is worth having before either deal starts. Talk with a business lender.
Program rules have moved more than once in three years. Our current-state breakdown is in SBA loan rules in 2026, and where anything here matters to a decision you are about to make, confirm it with your lender rather than with an article.
Where We Are, and Who You Would Be Working With
A Minneapolis search brings up a lot of lenders. Some of them will underwrite your file in another state.
Our team is here. We have 21 locations across 18 Minnesota communities, including Minnetonka, Eden Prairie, Wayzata, North Oaks and Ramsey in the metro, with the bank's headquarters in Glencoe.
That matters on the deals that do not look like a template. A seasonal business. An acquisition where the seller is staying on for two years. A manufacturer buying the building down the road from the one they are renting. Those get decided by someone who knows the market they sit in, and who is still here for the renewal.
The full program detail, eligibility, and how the process runs is on our SBA loans in Minnesota page. We are also recognized among Minnesota's top banks, which is a nice thing to be able to say and a poor reason to pick a lender. Pick one who will tell you when the answer is a conventional loan.
Common Questions
Which bank in Minneapolis does SBA 504 loans?
Banks make SBA loans; the SBA guarantees a portion of them. Security Bank & Trust Co. works with business owners on both SBA 504 and SBA 7(a) across the Twin Cities metro and greater Minnesota, with 21 locations in 18 Minnesota communities and metro offices including Minnetonka, Eden Prairie and Wayzata. On a 504 the bank works alongside a Certified Development Company so both parts of the project move together rather than one after the other.
Which SBA loan should I use to buy the building my business rents?
Start the 504 conversation. The 504 program is built for owner-occupied commercial real estate, structured as roughly half from the bank, roughly 40 percent from a Certified Development Company, and around 10 percent equity from you. That equity requirement is usually lower than a conventional commercial mortgage asks for, which is often what makes the purchase possible in the year the building actually comes up for sale.
Which SBA program is best for buying a business in Minnesota?
Generally 7(a). It can finance goodwill, which is usually a large part of an acquisition price and which conventional lenders are reluctant to lend against, and it can combine real estate and working capital in a single loan. A complete change of ownership carries an equity injection requirement, currently a minimum of 10 percent of total project costs, and seller financing on full standby can count toward part of it. Confirm the current requirement with your lender before modeling a purchase price.
Which SBA loan is right for buying equipment?
It depends on how long the equipment lasts, not on what it costs. The 504 program covers long-term machinery with a useful remaining life of at least 10 years. Shorter-lived equipment, vehicles and technology generally belong in 7(a), which covers purchasing and installing machinery and equipment.
Can I get both a 7(a) and a 504 loan?
Yes, and as of July 4, 2026 you can generally get more of both than before. The SBA decoupled the two programs, so qualified borrowers who secure a 7(a) loan first may access up to $5 million through 7(a) and up to $5 million through 504, for a combined total of $10 million. The order matters. Tell your lender early if a second project is likely, so the two deals can be sequenced deliberately.
What if neither SBA program fits my purchase?
Two alternatives are worth asking about. The Minnesota Loan Guarantee Program is a state program in which Security Bank & Trust Co. is an enrolled lender, guaranteeing up to 80 percent of principal with a maximum guarantee of $800,000, for Minnesota businesses under the program's employee thresholds. Or a conventional loan, which is often faster and lighter on paperwork when your business has the cash flow, equity and collateral to support it. An SBA program bridges a specific gap. Where there is no gap, you do not need one.
Who should I talk to about an SBA loan in the Twin Cities?
Start with a business lender rather than an application. The useful first conversation is about what you are trying to buy, so the structure gets sorted out before anyone assembles a file. Don Kleinschmidt and Ken Munroe are Senior VPs in Business Banking and work with business owners across the metro and greater Minnesota.
Bring Us the Purchase
You do not need to arrive knowing whether your deal is a 7(a) or a 504. That is our job. Tell us what you are trying to buy and we will tell you which program fits, in what order to do it, and when the honest answer is a conventional loan instead. That is another way we are
Growing, together.
Apply today, or start with a conversation.
Keep reading
- SBA loans in Minnesota, the full program detail and eligibility
- SBA loan rules in 2026, what applies now
- Small business loans, conventional structures alongside the SBA programs
- Business acquisition loan financing
- Buying your own building
All loans are subject to credit approval. SBA program terms, eligibility requirements, and guarantee provisions are set by the U.S. Small Business Administration and are subject to change. Minnesota Loan Guarantee Program terms are set by the State of Minnesota. Talk with your lender about the option that fits your situation.
