SBA Hot Topic Tuesday: Coordinating SBA 7(a) and 504 Maximum Loan Limits

June 30, 2026

Bob Coleman
Founder & Publisher

SBA Hot Topic Tuesday: Coordinating SBA 7(a) and 504 Maximum Loan Limits

The SBA’s June 9, 2026, 504 Connect Quarterly Update call introduced one of the most significant policy changes in recent years affecting the coordination of SBA 7(a) and 504 financing. Policy Notice 5000-879058 clarifies that a borrower’s outstanding 7(a) loan balance does not reduce the maximum financing available under the 504 program, expands the ability to structure larger capital stacks, and provides additional guidance on multiple projects, sequencing, and project definitions.

SBA Connect Call June 9, 2026

The notice clarifies that a borrower’s outstanding 7(a) balances will not reduce the 504 maximum available under the 504 program. Previously, lenders had to calculate outstanding 7(a) and 504 balances to determine remaining eligibility. This change simplifies access to capital and is an important first step toward larger capital stacks.

SBA Connect Call June 9, 2026

 The notice also clarifies that a CDC may submit multiple projects simultaneously. The previous 90-day pause is no longer required. There remain independent statutory limits for both the 7(a) and 504 programs.

SBA Connect Call June 9, 2026

Sequencing remains important. Obtain the 7(a) approval first, followed by the 504 loan. The policy increases access to capital by allowing 7(a) financing for working capital or equipment, and 504 financing for real estate and major fixed assets.

Question: Can you clarify again why the sequencing of 7(a) and 504 approvals is important?

Emily Dachon: The sequencing requirement is based on statute. The Small Business Act contains the guarantee limitation for 7(a) loans, while the Small Business Investment Act governing the 504 program does not contain the same cross-program limitation. Because of that statutory difference, the 7(a) loan must be approved first, followed by the 504 loan.

Linda Reilly: Exactly. The 7(a) program came first and sees the entire guaranty exposure. The 504 program focuses on the project itself. That is why the proper sequence is 7(a) approval first, then the 504 approval.

SBA Connect Call June 9, 2026

The manufacturing limit is up to $5.5 million per qualifying project. Energy Public Policy projects remain subject to the aggregate statutory limit. These changes provide greater flexibility for larger manufacturing projects.

SBA Connect Call June 9, 2026

A 504 project may include multiple long-term fixed assets, but assets financed with 7(a) and 504 must be separate and distinct. CDC credit memorandums should explain the complete capital stack. SBA recommends including the third-party lender underwriting memorandum as a best practice.

Question: Is the TPL credit memorandum a requirement or a recommendation?

Dan Pische: It is not a program requirement at this time. It is a best practice we are evaluating. For larger, more complex credits, SBA benefits from reviewing the lender’s underwriting analysis—not ancillary banking products—to better understand the transaction.

Thomas Kimsey: As we move into larger transactions, additional underwriting is critical. We hope third-party lenders will work with SBA by sharing the underwriting analysis that supports the credit decision.