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  • Writer's pictureColin Dubel

The Difference Between a Conventional Mortgage & an SBA Mortgage

A conventional commercial mortgage and an SBA commercial mortgage are two different types of loans that are available for businesses to finance their commercial properties. Here are some of the key differences between them:

  1. Loan Guarantee: A conventional commercial mortgage is not guaranteed by any government agency, while an SBA commercial mortgage is partially guaranteed by the Small Business Administration (SBA). This means that lenders are more willing to offer SBA loans to businesses that might not qualify for conventional loans because of their credit history or lack of collateral.

  2. Down Payment: With a conventional commercial mortgage, the down payment required by the lender can range from 10-30% of the property value. In contrast, SBA commercial mortgages require a down payment of only 10% of the property value.

  3. Loan Amount: Conventional commercial mortgages typically have higher loan limits than SBA commercial mortgages. The maximum loan amount for an SBA 7(a) loan, for example, is $5 million, while the maximum loan amount for a conventional commercial mortgage can be much higher.

  4. Interest Rates: SBA commercial mortgages generally have lower interest rates than conventional commercial mortgages. The SBA sets a maximum interest rate that lenders can charge on SBA loans, which helps to keep rates low for borrowers.

  5. Terms: The terms of conventional commercial mortgages can vary widely, depending on the lender and the borrower's qualifications. SBA commercial mortgages, on the other hand, have standardized terms that are set by the SBA. This can make it easier for businesses to compare loan options and choose the one that works best for them.

In summary, SBA commercial mortgages offer several advantages over conventional commercial mortgages, including lower down payments, lower interest rates, and more flexible qualification requirements. However, they also have lower loan limits and less flexibility in terms of loan terms. Businesses should carefully consider their options and consult with a lender to determine which type of loan is best for their needs.


If you have any questions about this article or would like to discuss a scenario of your own with our team, please feel free to contact Colin Dubel at colin@harborwestcommercial.com or 949-735-6415.

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