Full Scope of Project Costs in U.S. Real Estate Development (RV Parks, Hotels & Gas Stations)

Real estate development projects involve a wide range of costs from initial planning through construction and opening. This guide provides a comprehensive breakdown of project cost categories – from tangible construction expenses to financing outlays – and explains which costs are typically included in a development pro forma versus those usually excluded. We will illustrate each cost category with examples from RV park, hotel, and gas station projects, highlighting commonalities and differences. We also discuss how U.S. Small Business Administration (SBA) loan programs (7(a) and 504) apply to these costs, including eligibility of each cost type, typical limitations, and recent SBA updates through 2026 that affect project financing.

Key Project Cost Categories

Hard Costs (Construction Costs)

Hard costs are the direct, physical costs of constructing the project. These include labor and materials for site work and building construction, along with contractor fees and construction equipment. Hard costs often represent the largest share of a development budget (commonly 60–70% of total costs). They encompass everything that creates the physical property on site:

• RV Parks: Hard costs cover land clearing and grading, roadways and RV pads (gravel or paved), utility infrastructure (water, sewer/septic, electrical hookups), and construction of facilities such as bathhouses, laundry buildings, or an office/clubhouse. For example, installing basic gravel roads and utility hookups across a campground can cost hundreds of thousands of dollars. Essential structures like restrooms/shower houses (whether built on-site or delivered prefabricated) are also part of hard costs, as are amenities like picnic shelters or swimming pools.

• Hotels: Hard costs include all on-site construction of the hotel building and exterior improvements. This ranges from excavation, foundation, and structural frame to interior build-out of guest rooms and common areas. Major line items include materials like concrete, steel, drywall, roofing, and finishes, as well as mechanical systems (HVAC, plumbing, electrical) and vertical transport (elevators). Site improvements such as parking lots, landscaping, and utility connections are also hard costs. Because hotels are enclosed structures, building construction dominates their hard cost budget, which can be several hundred dollars per square foot depending on location and quality tier. Contractor overhead and profit is typically baked into these construction line items.

• Gas Stations: Hard construction costs for a gas station involve significant site work and specialized installations. Key expenses include excavation and installation of underground storage tanks, fuel piping, and leak detection systems; construction of the convenience store building or service station structure; installation of the pump islands and canopy; and paving for driveways, parking, and curbs. Many of these are infrastructure-heavy: for instance, installing USTs (underground tanks) and related systems requires excavation, environmental safety measures, and testing. The cost of basic site prep and paving alone can be substantial, and using durable materials (e.g. concrete pads) adds to the budget. Hard costs also cover utility connections (electric for pumps/lighting, water/sewer for the store) and any site-specific needs like drainage or retaining walls. Signage and lighting poles are usually included here as well.

In all three project types, material and labor costs are major drivers of hard cost. Fluctuations in material prices (steel, lumber, concrete, etc.) and labor rates can significantly impact the budget. Moreover, each project type might have unique construction elements – for example, a hotel requires extensive interior finishing and fire/life safety systems, a gas station requires specialized fuel system construction, and an RV park involves large-area site development but fewer enclosed structures. Despite these differences, hard costs directly create the physical asset and are therefore always included in the development pro forma.

Soft Costs (Professional Services & Regulatory)

Soft costs are the indirect costs required to develop and design the project, obtain approvals, and manage the process. They are “intangible” in that they do not result in a physical asset on the site, but they are crucial to getting the project built. Soft costs typically range around 15%–30% of the total project budget. These include:

• Architecture and Engineering: Design professionals’ fees for project design, engineering, and planning. This covers architects (from initial concepts and schematics to detailed construction drawings) and various engineers – civil engineers for site grading and utilities, structural engineers for building design, mechanical/electrical/plumbing engineers, traffic engineers, etc.. For example, a hotel project will incur substantial architectural fees (often a percentage of construction cost) to develop the hotel’s design and meet brand standards, as well as engineering costs for structural and MEP systems. An RV park might involve civil engineering for site layout, utility systems (electrical distribution, water well or hookups, septic or wastewater treatment), and landscape architecture for the campground plan. A gas station project typically requires specialized engineering for the fuel system (tank and pump system design, environmental engineering) and an architect for the convenience store building and site layout.

• Permits and Fees: All permits, review fees, and impact fees paid to government agencies. This includes building permit fees, zoning/planning application fees, environmental permits, utility connection fees, and any required development impact fees (for roads, water/sewer, etc.). These can be significant, especially in regulated jurisdictions. For instance, a gas station will always require environmental site assessments (Phase I, and Phase II if needed) due to underground tanks, and the costs of those studies and permits are soft costs. An RV park might need special use permits or health department permits (for campground operation or septic systems), and hotels often pay substantial impact fees (for utilities or traffic mitigation) and must obtain licenses (e.g. for elevators, fire safety) before opening. Permit and regulatory costs for a project can range widely (five to six figures) depending on local requirements.

• Legal and Consulting: Legal fees for contracts, land acquisition, and entitlement work, as well as any consulting fees for studies (market feasibility studies, environmental consultants, traffic studies, etc.). A hotel developer might hire a hospitality consultant to validate the market and projections, while a gas station developer could need environmental legal counsel to navigate regulations for fuel storage. RV park developers may consult land-use attorneys or zoning specialists to secure the necessary zoning or conditional use approvals for a campground. These soft costs ensure the project is properly entitled and compliant.

• Project Management and Administrative: Fees for project management or an owner’s representative overseeing the development on the owner’s behalf. Sometimes developers pay a project management firm or charge a developer fee for coordinating the project – this would be considered a soft cost. It also includes administrative costs like insurance during construction (builder’s risk insurance, general liability) and possibly construction loan fees or interest (though we treat financing costs separately below). For example, in an RV park project, the developer might hire a project manager to coordinate contractors and schedules across the large site; in a hotel, the complexity often justifies a dedicated project management team; for a smaller gas station build, the general contractor might handle most coordination, reducing the need for a separate owner’s rep fee.

• Design and Branding Fees: In a hotel project, if the property will operate under a franchise flag, there could be franchise-related fees (e.g. plan review by the brand, or a required prototype design fee). Those costs are unique soft costs for franchised hotels. Gas stations similarly might involve brand affiliation (e.g. converting to a major oil brand can involve fees or required improvements). RV parks could have expenses for designing theme elements or signage to craft a brand identity.

• Pre-Development Studies: Many projects incur costs for feasibility studies, environmental impact studies, or soil tests before construction. These are soft costs often incurred early (and typically included in the pro forma if the project moves forward). For instance, a Phase I Environmental Site Assessment is mandatory for any gas station development loan (due to potential contamination) and would be a soft cost; geotechnical soil borings for a hotel high-rise foundation are another example.

Soft costs are generally included in the development budget/pro forma, as they are necessary expenditures to complete the project. It’s important to budget adequately for soft costs – complex projects in stringent regulatory environments (e.g. a hotel in a big city) will incur higher architectural and permitting expenses than simpler projects. Across RV parks, hotels, and gas stations, the types of soft cost line items are similar (design, permits, consulting), though the magnitude and specific requirements differ.

Contingency Costs

Every development budget carries a contingency allowance to cover unforeseen expenses or overruns. A contingency is essentially a reserve fund (usually a percentage of hard costs) set aside for surprises – such as unexpected site conditions, design changes, or price increases during construction. It is standard to allocate around 5–10% of construction costs as contingency in a pro forma, though the percentage can be higher for complex or risky projects.

For example, a 10% contingency on hard costs might be budgeted for a hotel to account for potential change orders or delays. An RV park developer might set aside ~10–15% given the possibility of finding poor soil or utility issues across a large site (e.g. discovering that additional drainage is needed or encountering rock during trenching). Gas station projects also warrant a healthy contingency (often 10% or more) due to environmental uncertainty – if old underground tanks are being removed or if extra remediation is required, costs can spike unexpectedly.

Contingency funds are included in the development budget but only used if needed. Good practice is to reserve these funds strictly for true unforeseen conditions or necessary scope changes, not for enhancements. If a portion of the contingency is unused at project completion, that portion simply reduces the total cost. Some lenders and programs treat contingency formally. For instance, the SBA typically allows a construction contingency of about 10% of construction costs to be built into the loan-supported budget, but does not allow an undefined “miscellaneous” contingency on the entire project. In fact, SBA rules distinguish that only a construction/renovation contingency (usually 10% of those costs) is permitted, whereas padding other line items is not allowed.

Contingency is crucial for all project types: RV parks may encounter unanticipated grading issues or higher utility hookup fees; hotels might face design modifications to meet code or brand requirements; gas stations could see price volatility in materials or unexpected compliance upgrades. Including a contingency protects the project from minor shocks and is viewed favorably by investors and lenders as a sign of prudent planning. (Notably, some development pro formas also include a soft cost contingency or separate contingency for professional fees if the project scope isn’t fully defined, though this is less common than a construction contingency.) Overall, contingency reserves of around 5–15% are recommended to ensure the project can handle overruns.

Equipment and FF&E Costs

Equipment costs refer to the purchase of furniture, fixtures, and equipment (often abbreviated FF&E) needed for the project to function. These are generally movable (or installable) items that are not part of the base building contract. In a real estate development pro forma, major equipment and FF&E are often listed as separate line items because they can be significant – especially for hospitality or service businesses – and may be financed differently or depreciated over a shorter life than the building itself.

• RV Parks: Equipment needs for an RV park can include park-specific fixtures and machinery. For example, the laundry facilities require commercial washers and dryers; communal areas might need equipment like water heaters, HVAC units for a bathhouse, or pool equipment (if a swimming pool or splash pad is built). Outdoor recreational equipment (playground sets, picnic tables, grills) and maintenance equipment (mowers, tractors, utility carts) are also part of an RV park’s FF&E. While each individual item may not be as expensive as hotel FF&E, collectively these costs add up. An RV park development budget might allocate funds for site furnishings and maintenance gear to ensure the park can operate smoothly from day one.

• Hotels: Hotels have substantial FF&E budgets. This includes all the furniture, fixtures, and equipment that outfit the guest rooms and common areas: beds, dressers, TVs, mini-fridges, sofas, carpeting, lighting fixtures, etc., as well as lobby furniture, restaurant/kitchen equipment, and back-of-house equipment (commercial laundry machines, IT systems, etc.). Industry data shows that FF&E can account for roughly 7–10% of a hotel project’s total budget. For instance, a midscale hotel might spend on the order of $10,000 per room on FF&E package, covering casegoods, seating, and decorative items. In addition, hotels have operating supplies and equipment (OS&E)costs for items like linens, mattresses, dishes, and computers. These items are often budgeted separately as “pre-opening supplies,” but they are part of the overall startup cost (see discussion of working capital). The FF&E category is always included in a hotel development plan because a hotel cannot open without these furnishings in place.

• Gas Stations: Key equipment for a gas station includes the fuel dispensing systems (pump machines, hoses, nozzles) and point-of-sale systems inside the convenience store. The cost of fuel pumps and related hardware is significant – modern gas pumps with card readers can cost tens of thousands of dollars each. Additionally, the station needs refrigeration units (coolers and freezers for beverages and perishables), coffee machines, food service equipment (if offering hot food), and shelving and displays for the convenience store interior. Security systems (cameras, alarms) and an electronic price sign are also part of the equipment list. These items are critical for operations and thus typically financed as part of the project. SBA loans, for example, explicitly allow financing for new gas station construction to cover pumps, underground tanks, point-of-sale (POS) systems, and other equipment, in addition to the building and site work.

Equipment/FF&E costs are generally included in the project’s development budget, especially when they are necessary to place the asset into service. However, some development pro formas distinguish between “brick-and-mortar” construction costs and FF&E to clarify what portion of the total cost goes to furnishings and equipment. This distinction is also important for financing: some lenders or loan programs treat FF&E differently (for example, shorter loan terms for equipment versus real estate). In the case of SBA 504 loans, equipment with a useful life of 10 years or more can be financed as part of the project – which would include long-lived items like fuel pumps or heavy machinery. Items like furniture, which may not last 10+ years, might be financed under a 7(a) loan or through an equipment loan if not covered by 504. In any case, the development plan for a hotel or gas station must budget for these items to ensure the business is fully outfitted at opening.

Financing and Carrying Costs

Beyond bricks, mortar, and equipment, a full project budget must account for financing costs and other carrying costs that accrue during development. These costs are often necessary to bring the project to completion and are usually included in the total project cost calculation (though sometimes tracked separately in a pro forma). Key financial cost components are:

• Loan Interest During Construction: Most developments are financed with a construction loan or other debt that charges interest before the project generates revenue. The interest that accrues on construction financing is a real cost of the project. Many pro formas will include an interest reserve or capitalized interest line item – essentially money set aside to pay loan interest until the project stabilizes. For example, if building a hotel takes 18 months, the interest on the construction loan for those 18 months is part of the project cost (often financed into the loan). Similarly, an RV park or gas station under construction for, say, 9–12 months will incur interest expenses that need funding. SBA 504 loans explicitly recognize interest on interim financing as an eligible project cost to be refinanced by the permanent loan. This means a developer can roll the interest from a construction line of credit into the SBA-backed loan takeout. In a development pro forma, interest during construction (and a few months beyond, until occupancy) is typically included to ensure sufficient funding to cover the debt service before income starts.

• Financing Fees and Charges: Obtaining financing comes with fees that are part of project costs. These include loan origination fees or points, lender legal fees, appraisal fees, title insurance for the lender, construction loan draw fees, and (in the case of SBA loans) guaranty fees. For instance, the SBA 7(a) loan program charges a guaranty fee (a percentage of the loan) that lenders often allow to be financed into the loan – effectively making it part of project cost. These financing costs can be significant; however, note that in 2023-2024 the SBA temporarily waived guaranty fees on smaller loans and certain projects to encourage borrowing. In any case, a prudent budget will include line items for these fees.

• Construction Period Taxes and Insurance: While the project is being built, the developer must carry the property financially. This means paying property taxes, property insurance, and site security or maintenance costs during construction (often categorized as carrying costs or holding costs). For example, property tax on the land continues even before the project produces income; insurance (builder’s risk) must be in place throughout construction. These costs can run for many months, especially on larger projects, and so they are included in the pro forma funding needs. All project types have these carrying costs – an RV park on 20 acres may incur property taxes and liability insurance costs during its development period, a hotel under construction must maintain insurance and pay any assessed taxes on the parcel, and a gas station project will likewise have insurance (including perhaps special pollution liability coverage) and taxes to pay.

• Developer Fees or Development Management: Some pro formas include a developer’s fee payable to the sponsor for managing the development. In the context of SBA or lender underwriting, such fees, if included, might be scrutinized – lenders generally expect the developer to have equity at risk and not simply pay themselves out of the loan proceeds. Nonetheless, in many projects a developer fee of, say, 3–5% of project costs may be budgeted. Whether this is included as a cost in the pro forma depends on the deal structure. If included, it’s a cost that must typically be funded by equity (many lenders won’t finance a developer’s profit). For SBA loans, proceeds cannot be used to compensate an owner for work they perform on the project (that would be considered an ineligible use of funds in most cases). Therefore, while a development fee might appear in a project budget, it may effectively come out of the developer’s share of returns rather than financed cash.

All these financial costs are commonly included in the total development cost calculation. They do not create a tangible asset, but they are necessary expenditures to get the project funded and completed. For instance, the U.S. EPA’s model pro forma for redevelopment projects totals up purchase price, construction costs, and carrying costs (interest, taxes, etc.) to arrive at the full project cost. One important exclusion, however, is that interest on equity is not included – if the developer uses some of their own cash, the “cost” of that equity (opportunity cost) is not part of accounting project cost (though a developer might consider it in their returns).

In summary, when planning a project’s finances, one must budget not only for the direct costs of land and construction, but also for the financing and holding costs that accrue before the project is operational. In a hotel or large project, these can be sizable (multi-million dollar interest reserves, etc.), whereas in a smaller development like a single gas station, the timeline is shorter so carrying costs are more modest. Still, excluding these costs in a pro forma would paint an incomplete picture of the capital required to develop the project.

Pro Forma Inclusions vs. Excluded Costs

A development pro forma typically includes all capital expenditures required to bring the project to completion and operation, but it usually excludes ongoing operational expenses or other non-capital costs. Based on industry practice, the following are usually included in a real estate development budget/pro forma:

• Land Acquisition Costs: If the project involves purchasing land or an existing property, that purchase price (and associated closing costs like title insurance, legal fees, transfer taxes) is included. Land is the foundation of the project cost and is counted in total development cost. (In some cases, if the land is already owned by the developer, the pro forma might still impute a land value or carry the land as equity, but it is recognized as part of project cost.)

• Hard Costs (Construction): All on-site improvement costs – building construction, site work, landscaping, etc. – as detailed earlier, are included in the pro forma. These are the core of the project budget.

• Soft Costs (Design/Professional Fees, Permits): All necessary professional services and approval costs to get the project designed and approved are included. This ensures the pro forma captures the true cost of development beyond just bricks and mortar.

• Contingencies: A reasonable contingency allowance (generally a percentage of hard costs, and sometimes a small contingency for soft costs) is included as a line item. It is part of the budget to ensure funding for unexpected events.

• FF&E/Equipment: Any furniture, fixtures, and equipment required to open the facility is included in the total project cost. For example, a hotel’s pro forma will include an FF&E budget for furnishing rooms and common areas, and a gas station’s budget will include the cost of pumps and store fixtures. These are capital costs that must be incurred before operations begin.

• Financing and Carry Costs up to Opening: Interest during construction, loan fees, construction-period insurance and taxes, and any other carrying costs until the project is completed (or until it reaches stable occupancy) are typically included. In other words, the pro forma usually calculates a Total Development Cost (TDC) that encompasses “all-in” costs to get the project built and operational. For example, a hotel development pro forma would include a line for “construction loan interest” or “interest reserve” covering interest payments until the hotel opens and begins generating cash flow.

On the other hand, costs that are excluded or considered ineligible in a development pro forma tend to be those beyond the scope of getting the project built and launched. Commonly excluded costs (or costs handled separately from the development budget) include:

• Operating Working Capital: Money needed to actually operate the business after opening (e.g. to cover initial payroll, utilities, and other operating expenses until revenue is sufficient). Development budgets typically do notinclude post-opening working capital, as that is considered an operating finance matter, not a capital cost of development. For instance, the budget to build a hotel would not inherently include funds for hiring staff and operating the hotel – that would be a separate financing need, often covered by a working capital loan or the owner’s cash. In the context of SBA loans, working capital can be financed by a 7(a) loan, but it is not part of a 504 project cost. Thus, pro formas separate the real estate project costs from operational cash needs.

• Inventory and Initial Stock: For a gas station, the cost of initial fuel inventory or merchandise for the convenience store is not a development cost – it’s a business operating cost. The same goes for a hotel’s initial stock of linens, toiletries, food and beverage inventory, etc. These items, while needed on day one, are considered working capital or operating costs. They might be funded by a business loan or owner’s equity, but they are not included in the real estate development pro forma. (Some comprehensive project budgets will show a separate section for “pre-opening and working capital,” as the hotel budget example did, but they delineate it from the core construction budget.)

• Post-Opening Operational Costs: Any expenses that occur after the property is open and generating revenue are generally not in the development budget. For example, ongoing marketing costs, employee salaries, and maintenance after opening are not capitalized into project cost. One gray area is initial marketing and lease-up costs – many developers do include a lease-up or grand opening marketing budget in their project costs, since those expenses are incurred to achieve stabilized occupancy. For instance, a new RV park might budget some advertising and promotion expense leading up to and just after opening (to attract customers) – this could be considered part of the project’s startup costs. In fact, the Feldman Equities guide notes that developers often hire marketing agencies for lease-up campaigns as a project nears completion. So, some initial marketing is included. But ongoingadvertising or routine operating costs would not be.

• Developer’s Internal Overhead: Generally, the developer’s own ongoing overhead (office rent, in-house staff salaries) is not billed to the project in the pro forma, except to the extent it’s covered by a developer fee or construction management fee. Lenders and partners expect that overhead to be covered by the developer’s share of profit, not as a reimbursed project cost.

• Certain Ineligible Costs by Lender/SBA Standards: If using financing, some costs might be outright ineligible to be financed and thus effectively excluded. For example, the SBA will not finance any portion of a project that is for an investment property (non-owner-occupied real estate), or any cost that cannot be documented/verified. They also disallow using loan funds for bonuses, dividends, or reimbursement for expenses paid far in the past. In a development context, this means if a developer spent money years before on initial plans or on an old land survey, those might not be eligible to roll into an SBA loan now (there are limits on refinancing past expenses). Those costs might still appear in the total project budget (because the money was spent), but a lender might exclude them from the financed amount. Another example: goodwill or the cost of buying an existing business’s intangible value – not applicable to ground-up development, but if one were buying an existing RV park business, the portion of price attributed to goodwill cannot be financed with 504 and would be treated separately.

In summary, a pro forma focuses on capital expenditures necessary to create a functioning real estate asset. It includes land, development, and delivery of the project ready for operation. It usually excludes pure business operation funds and any costs that don’t directly contribute to the asset’s creation or initial occupancy. This delineation is important for financial planning: developers often must arrange separate financing for working capital or be prepared with equity to handle those excluded needs. As one hotel development cost guide succinctly lists, a full project budget will have categories like land, hard costs, soft costs, FF&E, working capital, and pre-opening expenses – but the latter two (working capital and pre-opening) are often handled outside the main construction loan or via an SBA 7(a) loan rather than in the core development loan.

SBA 7(a) and 504 Loans – Coverage of Project Costs

Both SBA 7(a) and SBA 504 loan programs are popular financing tools for small business real estate projects, including hotels, gas stations, and RV parks. However, they have different structures and rules regarding what project costs can be financed. Below is a guide to how each program applies to development project costs, and how they treat categories like contingency, equipment, and working capital.

SBA 7(a) Loans – Eligible Costs and Key Features

The SBA 7(a) loan is a general small business loan guaranty program. It can be used for a wide variety of business purposes, which makes it quite flexible for financing development projects that are tied to an operating business (such as a hotel, gas station or RV campground business). Under 7(a), a private lender makes the loan and the SBA provides a guaranty (typically 75–85% of the loan is guaranteed by SBA, depending on loan size). Key points on cost eligibility and limitations:

• Uses of Proceeds: A 7(a) loan can finance nearly all components of a project – including purchasing land or an existing building, ground-up construction costs, renovation costs, equipment purchases, and even working capital. According to SBA and industry guidance, 7(a) loans can cover new construction expenses such as building improvements and infrastructure, fuel pumps and underground tanks for a gas station, POS systems, parking lot paving, etc., as well as the business acquisition or expansion costs. For example, for a gas station development, a single 7(a) loan could fund buying the land, constructing the facility, installing the tanks and pumps, and also provide additional funds for initial inventory and working capital to operate the station. This all-in-one capability is a major advantage of 7(a). Hotels and RV parks similarly can have their land, construction, FF&E, and some amount of startup working capital financed in one 7(a) package (subject to the overall loan limit).

• Maximum Loan Size: The standard 7(a) loan is capped at $5 million (gross amount) to any one borrower. This effectively limits the project size that can be fully financed with one 7(a) – if a project costs more than $5M, the borrower must inject the rest as equity or find other financing. In many cases, developers use 7(a) for projects in the few-million-dollar range. For instance, a 50-room midscale hotel might have a project cost of $8 million; a lender could do a $5M 7(a) and the borrower would put in $3M (or use subordinate financing). The $5M cap also means very large projects (like a huge resort or multi-property developments) are beyond 7(a)’s scope. But for typical small business projects – a roadside hotel, a new RV park development, or a gas station – the size often fits within this limit. (Note: In 2023, the SBA briefly introduced higher loan authorizations for certain borrowers under a temporary program, but as of 2025 the $5M cap remains for standard 7(a).)

• Equity Injection Requirement: Traditionally, SBA 7(a) loans have required the borrower to invest some equity (often around 10% of the total project cost for a startup or new construction). In 2023, SBA revised guidelines to not mandate a fixed 10% equity injection for most 7(a) loans, instead leaving it to lender policy for loans under certain thresholds. However, practically, lenders usually do require at least 10% (or more for riskier ventures) as a down payment. So, while SBA might not explicitly require a 10% injection for a new hotel project, the bank making the loan will likely insist on it. This equity covers any costs that exceed the loan or that the SBA deems ineligible. For special-purpose properties like hotels or gas stations, lenders may even want more equity (because such properties have narrower resale markets). In summary, expect to provide a equity/down payment toward the project – the loan won’t typically cover 100% of costs.

• Included/Excluded Costs: Under 7(a) rules, virtually any reasonable business project cost can be financed except a few prohibited uses. Eligible costs include: land acquisition, construction labor and materials, site improvements, soft costs like architect and engineering fees, permit fees, equipment and fixtures, and even some contingency for construction overruns. Also, working capital and startup costs (like marketing, initial payroll, inventory) are eligible uses of 7(a) funds – something not possible under 504. Ineligible uses of 7(a) funds would be things like reimbursing the owner for earlier project expenses that were paid long before loan application (there are look-back limits), or purely speculative investments. Notably, 7(a) loans cannot be used for an investment property (i.e., a project where the borrower will not occupy/use the asset for business). All our examples (hotel, gas station, RV park) involve the owner operating the business, so they are eligible.

• Contingency Treatment: As mentioned, SBA 7(a) loans allow a construction contingency to be included, but only tied to construction costs. Typically, lenders will permit around a 10% contingency on hard costs. They will not allow a general “slush fund” beyond that. The contingency portion will be documented and controlled – e.g. the bank may require that contingency disbursements be approved for specific overruns. If the contingency is not used, the loan amount might simply not fully fund, or the unused portion would be paid back. The SBA’s guidance specifically says no “total project” contingency beyond the construction line, underscoring that any extra funds must be justified by actual cost increases.

• Equipment and FF&E: 7(a) can finance all types of equipment needed for the business, whether it’s long-term fixed equipment or shorter-life assets. For example, kitchen equipment in a hotel’s restaurant, computer systems, vehicles for park maintenance, or point-of-sale systems for a gas station are all eligible. These can be included in the same loan. The loan term may be adjusted if a significant portion of the loan is for shorter-lived assets, but SBA often allows a blended term. In practice, if real estate is the majority of collateral, lenders often give the maximum term (25 years) even though some portion is equipment/working capital. This is a big advantage of 7(a): it can effectively provide long-term financing for equipment and working capital that normally would have shorter repayment in conventional lending.

• Working Capital: One of the biggest differences in 7(a) is that it can provide working capital financing as part of the project. For example, in a hotel project, a 7(a) loan could include $200,000 of working capital on top of the construction costs to cover operating expenses and interest during the ramp-up period. In a gas station example, the 7(a) loan could include funds to purchase initial fuel inventory and stock the convenience store. Including working capital will usually not extend the term beyond 25 years (the max for real estate), but it gives breathing room for the business. SBA 7(a) even has special programs (such as SBA Express lines of credit, or the new Working Capital CAPLines) if ongoing working capital is needed, but those might be separate from the main project loan. The key point is that 7(a) loans offer flexibility to cover both the “hard” project costs and the “soft” opening costs of a business.

• Other Requirements: Borrowers must meet SBA’s size standards (be a small business by SBA definition) and be an active operating company. The property must be majority owner-occupied: for new construction, the rule is the business must initially occupy at least 60% of the space (if there is any extra leasable space) and plan to occupy 80% eventually. Most hotels, gas stations, and RV parks easily meet this since the owner’s business operates 100% of the site. SBA 7(a) loans do not have a formal job creation requirement, unlike 504, though the SBA likes to see that the loan will help the business grow (retain or create jobs as a byproduct). The underwriting for 7(a) will evaluate the feasibility and cash flow of the project – the borrower must show that after construction, the business can service the debt from its operating income. Feasibility studies or projections are often required, especially for hotels and campgrounds, to satisfy the lender and SBA that the project is sound.

In summary, an SBA 7(a) loan can be thought of as a one-stop financing for a small business real estate project, covering land, construction, equipment, and even working capital in one loan (up to $5M). Its flexibility is balanced by stringent underwriting – the borrower’s credit, experience, and business plan must convince the lender that the loan will be repaid. For our purposes, the main advantage is that 7(a) can fund all the cost categories discussed: it will finance hard and soft costs, allow a reasonable contingency, cover equipment and possibly some post-construction expenses, provided the total loan doesn’t exceed $5 million and the project can cash flow the debt. This makes it ideal for projects like a single gas station or a boutique motel development where the entire project is within that budget.

SBA 504 Loans – Eligible Project Costs and Structure

The SBA 504 loan program is designed specifically to finance long-term fixed assets – primarily real estate and heavy equipment – for small businesses. It is often used for real estate development or major expansions because it offers long-term, fixed-rate financing for up to 40% of the project cost, paired with a bank loan for 50% and a borrower down payment of typically 10%. Key aspects of 504 relative to project costs:

• Eligible Project Costs: By regulation, 504 loan proceeds can be used only for capital assets and certain related costs. Eligible costs include: acquisition of land and existing buildings; construction of new facilities or modernizing/renovating existing facilities; site improvements (grading, utilities, parking lots, landscaping); and purchase of long-life machinery and equipment. In addition, some soft costs that are directly attributable to the project can be included, such as architectural and engineering fees, environmental studies, appraisals, and legal fees for zoning/permitting. Also, interest on interim construction financing and lender fees can be rolled into the 504 funding. Essentially, if a cost is a necessary part of creating the fixed asset, 504 can cover it. For example, in a hotel project, the 504 loan could finance the land purchase, building construction, professional fees for design, and even the installation of furniture/fixtures/equipment that have a useful life of 10 years or more (like elevators, HVAC systems, kitchen equipment) as part of the total project cost. In a gas station, the 504 would cover land, construction of the store and canopy, installation of tanks and fuel systems (equipment), and related soft costs and permits. For an RV park, 504 could finance land acquisition, all the site development (roads, utility infrastructure, bathhouse construction), and large equipment like a maintenance truck or installed park models. The guiding principle is that 504 is for hard assets – the program explicitly does not finance working capital, inventory, or goodwill. It’s focused on the real estate/equipment.

• Project Structure (50-40-10): A typical 504 project is financed 50% by a bank (first mortgage loan), 40% by the SBA-backed debenture (second mortgage), and 10% by borrower injection. However, for special-purpose properties or new businesses, the required borrower contribution is higher. SBA considers hotels and gas stations as special purpose properties (properties that are not easily converted to other uses) – thus the borrower must put in 15% (if either the business is new or the property is special use, and 20% if both apply). In practice, many hotel projects under 504 end up with 15–20% equity requirements. Assuming a gas station is a new business for the borrower, that would trigger a 20% equity injection (because gas station is special-purpose by SBA definition and if the borrower has no existing operating history, it’s a startup). An RV park might also be deemed special-purpose (campgrounds are typically considered a limited-market property), so the same rule could apply. The increased equity lowers the SBA/CDC portion accordingly (e.g., 50% bank, 30-35% CDC, 15-20% equity). This structure influences what costs can be financed: essentially all eligible costs up to 90% of the project can be financed; the remaining 10% (or more) must be covered by equity.

• Contingency Allowance: The 504 program historically allowed a contingency reserve up to 10% of construction costs to be included as an eligible project cost. In late 2025, recognizing rising construction volatility, SBA raised this limit – now up to 15% of the construction budget can be included as contingency for 504 loans. This is a notable update, allowing developers a larger safety net. The rule also specifies what happens if the contingency isn’t fully used: if the leftover contingency is small (not more than 2% of the total debenture), it can be applied to working capital or other uses for the business; if it’s larger, the excess must be applied to reduce the SBA loan principal. This prevents misuse of contingency funds. For borrowers, this change means a bit more flexibility – for example, on a $2 million construction contract, up to $300,000 could be set aside for contingency under 504, whereas previously only $200,000 would be allowed. Given unpredictable costs in 2024–2026, this helps ensure the project is fully funded.

• Excluded Costs: As mentioned, working capital, inventory, and other operating expenses cannot be financed with 504. So any such needs have to be funded by other means (often by a companion 7(a) loan or line of credit, or by the borrower’s own cash). If a project includes things like franchise fees (for a hotel flag) or goodwill (for acquiring an existing facility), those portions would not be covered by the 504 and might need a 7(a) loan. For ground-up developments like we’re focusing on, the main exclusions to be aware of are: (a) pre-opening expenseslike payroll, training, initial marketing – 504 won’t cover these; and (b) any developer fees or internal profit – SBA will not finance a profit to the borrower. The project costs have to be arm’s-length expenses.

• Equipment under 504: A unique feature of 504 is that it can be used solely for large equipment purchases (with useful life >= 10 years) with 10-year loan terms. In a mixed project, equipment can be part of the total 504 package as long as it’s integral to the project. For example, if an RV park development required a $200,000 excavator for ongoing site maintenance (perhaps not typical, but say a piece of heavy equipment to be owned by the business), that could potentially be financed. More commonly, equipment means things like generators, large commercial kitchen equipment for a hotel’s restaurant, or, in the gas station, the underground tanks and fuel dispensers (which are considered part of the fixed installation). The 504 eligible cost rules explicitly mention that expenditures the borrower incurred prior to applying for the loan can be reimbursed if they are directly attributable to the project. So if the borrower already put a deposit on some equipment or bought the land with a short-term loan, those costs can be rolled into the 504 financing as well, so long as they meet eligibility and timing criteria.

• Loan Amounts and Terms: The SBA/CDC portion of a 504 loan (the debenture) has maximum limits – generally $5 million for regular projects, and up to $5.5 million for manufacturing or energy-efficient projects. This refers to the SBA second mortgage piece only. The overall project can be much larger since the bank is financing 50% (banks often have no programmatic limit, other than credit capacity). Many hotel projects use 504 if they are in the, say, $10–15 million total cost range (with a $5M CDC piece, $5–7M bank, and rest equity). Gas station projects, which might be in the $1–3 million range, easily fit within the limits. RV parks can vary widely in cost, but a moderate size park might be, say, $4 million total – that could be $2M bank, $1.6M CDC, $0.4M equity (10%). If special-purpose, adjust equity accordingly. The terms are attractive: CDC loans for real estate are 25-year fixed-rate, and for heavy equipment 10-year fixed. The bank loan is typically a 20-25 year amortization (often with a shorter adjustable rate term). These long terms help keep annual project costs (debt service) lower for the business.

• Occupancy and Job Requirements: For 504, the business must occupy at least 51% of the space for an existing building or 60% of a newly constructed building (similar to 7(a) requirements for real estate). So pure investment development is not allowed. Additionally, the 504 program has a job creation or retention goal – generally, one job should be created or retained per $75,000 of SBA funds within a couple of years of project completion. However, if that isn’t feasible, the project can alternatively qualify by meeting a community development or public policy goal (for example, rural development, minority-owned business, veteran-owned business, or revitalizing a distressed area). In practice, most hotel and gas station projects meet the job requirement because they employ staff. A small RV park might not create a large number of jobs, but if it’s in a rural or tourism development area, the CDC can use that policy goal to justify it. The job requirement is something to be mindful of – it’s part of the 504 loan application, but it typically isn’t a show-stopper for legitimate operating businesses.

To illustrate, consider a hotel project costing $8 million. With 504 financing (assuming special-purpose and new business), the structure might be: Bank loan $4 million (first lien), SBA 504 loan ~$2.8 million (second lien, which is 35% of cost in this case), and borrower equity ~$1.2 million (15%). The $8M cost would include land, construction, FF&E, soft costs, contingency, interest on interim loan – everything except working capital. If the hotel also needs $300k of working capital, the borrower might take a separate 7(a) loan for that, or use their own funds. Meanwhile, a gas station project costing $2 million could be financed as: Bank $1M, SBA $700k, borrower $300k (15%). The $2M covers buying the land, building, tanks, pumps, engineering, permits, contingency – all eligible. But if the station needs $150k for fuel inventory and cash till, that $150k cannot come from the 504; it would need to come from elsewhere (perhaps rolled into the bank loan if the bank is willing, or a 7(a) working capital loan, or borrower cash). An RV park costing $5 million might involve a bank $2.5M, SBA $2M, equity $0.5M (10% if not deemed special, or $1M if 20%). Again, all development costs for the park (land clearing, construction of facilities, site utilities, engineering) are covered, but initial operating cash (for hiring staff or buying golf carts or store inventory) would be outside the 504.

Overall, SBA 504 loans are excellent for covering the “hard” project costs — they offer a fixed-rate, long-term take-out that often makes the project feasible where a normal bank might not go 90% loan-to-cost on its own. The trade-off is the borrower must have more cash equity in (compared to some 7(a) deals which occasionally get by with 10% or less down for strong borrowers) and must plan for working capital needs separately. Many projects actually combine 504 and 7(a): use 504 for the real estate/build-out and a smaller 7(a) for working capital or furnishings that don’t fit neatly in 504. This combined approach can achieve nearly 90% financing of everything, which is very advantageous for small business owners with limited capital.

Treatment of Specific Cost Categories (7(a) vs 504)

To directly compare how the two SBA programs handle key cost categories:

• Land and Hard Construction Costs: Both 7(a) and 504 will finance these. 7(a) covers land and construction without special limits (aside from appraisal supporting value). 504 covers them as well, up to the participation percentages. One difference: 7(a) is a single loan, so the bank may finance land + construction and hold the loan until completion (or use disbursement controls); 504 typically involves an interim construction loan from a bank for 90% of costs which is then partly taken out by the 504 debenture at project completion. But from the borrower’s perspective, both programs fund these core costs.

• Soft Costs: Both programs finance soft costs. With 7(a), soft costs just count toward the total loan – the borrower can borrow for design fees, permits, etc., as long as the total loan is under the cap and the project appraises out. The lender will want invoices or contracts as proof of those costs. With 504, the inclusion of soft costs is explicitly allowed: the 504 portion can cover architectural/engineering fees, environmental reports, appraisal, and legal fees related to the project. This is very useful – for example, a $100k architecture fee can be financed as part of the project. Both programs typically require that soft costs be directly attributable to the project (you can’t, say, add unrelated legal fees). Documentation is needed; SBA wants to see these costs are legitimate.

• Contingency: As noted, 7(a) allows ~10% of construction as contingency; 504 allows up to 15% after 2025. In practice, many banks limit contingency to 10% even if SBA allows more, but SBA’s change gives flexibility for CDCs to approve 15% if justified by the project nature (e.g. large rehab with unknown conditions). Unused contingency in a 504 must reduce the SBA loan if above a small threshold; in 7(a), unused loan funds would either not be advanced or would be prepaid – there isn’t an explicit rule, but lenders won’t let you keep excess cash from a project loan.

• Equipment and FF&E: Both 7(a) and 504 finance equipment, but 7(a) will also finance shorter-life FF&E and even small tools as part of the loan, whereas 504 generally focuses on equipment with a long useful life (10+ years) if it’s being financed by the SBA debenture. For example, for a hotel’s FF&E: a 7(a) loan can cover the entire FF&E package (furniture, TVs, etc.) along with construction. A 504 loan could cover some of it, but often the loose furniture (which might have a 5-7 year replacement cycle) is not ideally suited for a 25-year loan. Some 504 deals include FF&E by having the bank finance those as part of their 50% loan (since the bank loan can cover anything as long as it’s secured), and the SBA portion sticks more to the building. Heavy equipment like kitchen appliances, industrial laundry machines, or generators can be in the SBA 504 portion if desired. Notably, gas station equipment – fuel pumps and tanks – are usually eligible 504 costs because they are integral and long-lived. Indeed, 7(a) and 504 both consider those essential; the 7(a) program explicitly cites pumps and tanks as financeable for gas station projects. One thing 504 cannot do is finance vehicles (like rolling stock) – those are not eligible for 504 unless they are essential and have 10+ year life (rare for vehicles). A 7(a) could finance a vehicle (like a shuttle van for a hotel or a maintenance truck for an RV park).

• Working Capital: Major divergence: 7(a) finances working capital, 504 does not. If a project requires, say, $200k of working capital (for payroll, supplies, etc.), a 7(a) loan can include that in the use of proceeds. A 504 loan cannot include it – the borrower would need to fund that separately or get a 7(a) loan in addition. This is why some borrowers pair the programs. For instance, after using a 504 to build a gas station, the owner might still need a $150k 7(a) line of credit to purchase fuel and stock the convenience store shelves. The SBA even carved out exceptions to its rules to facilitate this: currently, if a borrower gets both a 504 and a 7(a) working capital line around the same time, the usual rule that would combine loan amounts for fee calculations is waived – they let them be treated separately to encourage using working capital loans in conjunction. This indicates SBA’s recognition that 504 projects often need supplemental working capital. For hotels, working capital might cover the first few months of operating expenses; for RV parks, maybe initial marketing and staffing; these need to be planned for outside the 504.

• Loan Fees and Closing Costs: Both programs allow financing of their associated fees. In 7(a), the guaranty fee (if any) can be included in the loan request. In 504, the CDC fees, SBA guaranty fees, and closing costs are usually rolled into the debenture. So those costs become part of the project financing rather than out-of-pocket expenses.

• Refinancing During Expansion: One nuance – 504 can refinance existing debt as part of a project under certain conditions (e.g. refinancing an existing property mortgage if the project involves expansion). 7(a) can also refinance debt, but for new developments there typically isn’t existing debt except maybe land loans. This is more relevant if, say, someone already owns a property and is adding a big addition – 504 might refinance the old loan and finance the expansion together.

In summary, SBA 7(a) vs 504 in project costs comes down to breadth vs focus: 7(a) can cover everything (with a single loan but with a dollar cap), whereas 504 covers only fixed-asset costs (but with a higher combined funding potential and often at better rates for that portion). A savvy borrower will choose based on the project’s needs: if working capital and a smaller loan is key, 7(a) might be better; if the project is larger and primarily real estate, 504 can offer a lower effective interest rate and longer fixed term on the majority of the financing. Often a combination is the optimal solution for full-scope financing.

Recent Updates (2024–2026) in SBA Lending Criteria and Project Cost Guidelines

The period from 2024 through 2026 has seen several noteworthy changes in SBA loan programs that affect eligibility, lending practices, and how project costs are handled:

• Increased Contingency Allowances (2025): As mentioned above, SBA issued a change in late 2025 to allow larger contingency reserves in 504 projects. The maximum contingency was raised from 10% to 15% of construction costs. This update came via SBA Procedural Notice in October 2025, responding to feedback that rising costs and supply chain volatility warranted a bigger cushion. This change helps developers include a more realistic contingency in the financed amount. Additionally, the guidance clarified that if the contingency isn’t fully used, small remaining amounts (up to 2% of the debenture) can be retained by the borrower for working capital, but larger unused amounts must be applied to reduce the loan principal. Lenders and Certified Development Companies welcomed this flexibility, as it keeps projects from stalling due to cost overruns while ensuring any excess funds ultimately benefit the business or pay down debt.

• SBA 7(a) Underwriting and Eligibility Revisions (2023–2024): In 2023, the SBA implemented rules to streamline and broaden 7(a) loan access – for example, eliminating the strict “credit elsewhere” test and the personal resource test, and allowing lenders to use their own credit underwriting standards (the so-called “delegated underwriting” or “Do What You Do” approach) for loans under $500k. These changes made it easier for some borrowers to qualify (less emphasis on exhausting other options or injecting a fixed equity percentage). SBA also lifted a moratorium on licensing new Small Business Lending Companies (SBLCs) and introduced a Community Advantage SBLC category to increase non-bank lending in underserved markets – potentially making SBA loans (7(a) in particular) more accessible to projects in rural or underserved areas, which could include some RV park or convenience store developments. However, by late 2024 and into 2025, under new SBA leadership, some of these relaxed standards were reversed to ensure loan portfolio quality. In April 2025, SBA officially announced it was reinstating more robust lending criteria for 7(a), effectively ending the brief experiment with ultra-lenient underwriting. The “credit elsewhere” requirement (documenting why the borrower cannot get credit without the SBA guarantee) has been reinforced in SOP 50 10 8, and lenders must return to more thorough analysis of borrower equity and repayment ability, similar to pre-2023 standards. What this means for developers is that while SBA loans are still available, they will need to demonstrate strong business plans, adequate equity injection, and inability to obtain conventional financing, as was historically the case. The pendulum swung toward easy credit in 2023 and back toward caution in 2024–2025. Practically, someone planning a project in 2026 should expect SBA lenders to require solid credit, some level of down payment (10-20%), and proven cash flow projections – the leniencies like zero equity for startups are no longer guaranteed unless the lender independently allows it.

• Partial Change of Ownership Financing (2023): A rule change in 2023 expanded 7(a) loan eligibility to include financing for partial buyouts of business ownership. Previously, SBA loans required a change of ownership to be 100% (buying out an entire business). Now a borrower can use 7(a) funds to buy a portion of a business or property (such as buying out one partner). While this primarily affects business acquisitions, it could be relevant if, for example, a development entity wants to buy out a co-owner’s interest in the project’s land or assets as part of refinancing – 7(a) might accommodate that now. It’s a niche update but indicates SBA’s flexibility in use of proceeds has increased. (504 loans also got clarity that the selling partner can stay on as an owner in a partial sale, which previously was a gray area.) For ground-up projects, this might not come into play unless there’s a partnership restructuring.

• Fee Reductions and Waivers: SBA loan fees (which contribute to project financing costs) have seen changes. In FY2023 and FY2024, SBA had waived guaranty fees for small 7(a) loans (under $500k) and for veteran-owned businesses, etc. Those initiatives expired or were adjusted in FY2025. For FY2026 (Oct 2025 – Sep 2026), SBA announced major fee waivers for manufacturing sector loans: 7(a) loans up to $950,000 and all 504 loans to manufacturers have 0% upfront guaranty fees and no ongoing fees. This is part of a policy to spur manufacturing. While an RV park, hotel, or gas station wouldn’t qualify as “manufacturing,” it’s an example of how SBA is tweaking costs to borrowers in certain categories. More broadly applicable, SBA’s fee schedules are now adjusted yearly. As of late 2025, for regular 7(a) loans, the upfront guaranty fee was back in effect (around 3.5% of guaranteed portion for a $5M loan, for example) after being temporarily zero for some loans in 2023. For 504, the annual service fee for FY2025 was set around 0.397% of the loan and the one-time guaranty fee 0.50% (with both now waived for manufacturers). Developers considering SBA financing should stay updated on fee incentives that might reduce their financing costs. These fee changes don’t affect project eligibility, but they do impact the effective cost of financing (which in turn affects project feasibility calculations).

• Lending Capacity and Access: By rescinding the moratorium on new SBLC licenses in 2023, SBA opened the door for more non-bank lenders to make SBA loans. This could mean more lending options and potentially faster loan approvals due to increased competition. Also, SBA introduced technology and procedural improvements: for instance, a simplified loan authorization (the SBA no longer requires a separate loan authorization document for 7(a) as of 2023, streamlining closing), and improved their E-Tran system for quicker eligibility checks (implementing automatic fraud and eligibility verification APIs). These behind-the-scenes changes help lenders process SBA loans more efficiently, which can be crucial when a real estate transaction or construction timeline is on the line.

• Economic Environment Considerations: Although not a specific policy “update,” it’s worth noting that 2024–2026 brought higher interest rates (as the Federal Reserve tightened credit). SBA 7(a) rates are tied to Prime (plus a spread), so the cost of 7(a) loans rose in 2024 compared to the prior few years. By 2025, 7(a) loan rates were often in the high single digits. The 504 program’s fixed rates also increased from historic lows, but remain competitive due to the SBA’s pooling (e.g., mid-6% range for 25-year debentures in late 2025). This environment emphasizes why careful budgeting of project costs – including contingency – is vital, as financing is more expensive. It also underscores the value of SBA loans locking in long-term rates in an uncertain rate climate. Some 2024 legislative proposals aimed to raise SBA lending caps or enhance programs (for instance, there was talk of increasing the 7(a) cap or introducing new refinancing options), but as of early 2026, no major legislative changes have been enacted beyond the administrative rules discussed.

  
  

In conclusion, developers using SBA loans for real estate projects should be aware of these evolving guidelines. Higher contingency allowances under 504 give more breathing room in project budgets, while the return to stricter underwriting means a solid business case and borrower investment are as important as ever. SBA continues to encourage certain sectors with fee reductions (though our focus sectors don’t directly benefit from manufacturing incentives), and the overall process is improving technologically. Staying in close contact with knowledgeable SBA lenders or CDCs is advisable to navigate these changes. The good news is that SBA financing remains a powerful tool to fund comprehensive project costs – from land and hard costs to soft costs and equipment – enabling many small business real estate developments to move forward when conventional financing alone would be insufficient. By understanding all project cost components and how they align with lender and SBA criteria, developers and entrepreneurs can create robust pro formas and financing strategies for successful projects in 2026 and beyond.

January 23, 2026, by Michal Mohelsky, J.D., principal of MMCG Invest, LLC, SBA (Small business administration) compliant feasibility study company

Sources:

Government Sources (SBA Guidelines and Notices)

• SOP 50 10: Lender and Development Company Loan Programs (Version 8) – U.S. Small Business Administration (Office of Capital Access), effective June 1, 2025. URL:

• SBA Procedural Notice 5000-872764: Revisions to SOP 50 10 8 – 504 and 7(a) Loan Program Updates – U.S. Small Business Administration, effective September 30, 2025. URL:

• Business Loan Program Improvements: 7(a) and 504 Highlights – U.S. Small Business Administration (Office of Capital Access), published August 10, 2023. URL:

• 504 Loan Program – Terms, Conditions, and Eligibility – U.S. Small Business Administration, 2023. (General SBA 504 program guidelines and eligible project costs.) URL:

• 7(a) Loan Program – Terms, Conditions, and Eligibility – U.S. Small Business Administration, 2023. (General SBA 7(a) program guidelines, including use-of-proceeds for real estate projects.)

Industry Sources (Cost Guides and Development Playbooks)

• Innowave-Studio LLC Development Cost Survey 2025 – Innowave-studio , July 17, 2025. (Annual survey of per-room hotel development costs across hotel classes, based on 2024 project data.)

• Planning RV Park Development in the U.S.: An Investor-Focused Feasibility Guide – Loan Analytics (SBA & USDA Feasibility Consultants), June 2, 2025. (Detailed feasibility guide for RV park projects, including market analysis, infrastructure planning, capital cost ranges, revenue modeling, and risk factors.) URL: https://www.analytics.loan/post/planning-rv-park-development-in-the-u-s-an-investor-focused-feasibility-guide

• SBA 504 vs. 7(a) Loan Comparison – CDC Small Business Finance, n.d. (Side-by-side comparison of 504 and 7a loan terms, eligible uses of proceeds, project structures, and typical requirements – useful for understanding which program suits real estate development projects.)

Examples of Project Cost Breakdowns (Real-World Developments)

• Campground Construction Costs: Smart Strategies – Campground Consulting Group, 2023. (Outlines cost ranges per campsite for RV parks by amenity level: e.g. basic parks $10K–$20K per site, mid-range $20K–$40K, upscale resorts higher, plus common area and utility infrastructure costs. Emphasizes feasibility planning and contingency budgeting.)

• Hotel Development Cost Estimate Template – Mastt, 2024. (Provides a template and example for hotel project cost breakdown, including site works, construction, FF&E, professional fees, and contingencies. Useful for understanding allocation of costs in a hotel budget.)

Recent SBA Updates (2023–2026: Underwriting, Contingencies, Fees)

• Best Practices: Recent 504 and 7(a) Program Updates – Starfield & Smith, P.C. (SBA Lending Attorneys), October 8, 2025. (Law firm overview of SBA’s late-2025 SOP updates: e.g. increased 504 construction loan contingency cap from 10% to 15% of budget, streamlined “do-it-yourself” construction rules, changes to business expansion eligibility, and fee calculations for working-capital loans.)

• 7(a) Loan Program Modernization – Final Rule Changes 2023 – U.S. Congress CRS Report, July 2023. (Summary of SBA’s 2023 regulatory changes impacting underwriting: removal of SBA’s personal resource test and subjective affiliation criteria, allowance of partial change of ownership loans, simplified credit elsewhere documentation, and other SOP 50 10 7 updates.)

• SBA Waives Loan Fees for Small Manufacturers in FY 2026 – U.S. Small Business Administration (News Release No. 25-80), September 18, 2025. (Announces 0% upfront guaranty fees for 7(a) loans up to $950,000 in NAICS manufacturing sectors, and fee waivers (upfront and annual) for all 504 loans to manufacturers, effective Oct 1, 2025–Sept 30, 2026 – reducing project financing costs.)

• SBA Information Notice 5000-858936: 7(a) Fees for Fiscal Year 2025 – U.S. Small Business Administration (Office of Capital Access), effective July 23, 2024. (Details the annual SBA 7(a) loan fees for FY 2025 and exceptions/waivers authorized by Congress, such as reduced guaranty fees on smaller loans and veteran-owned business incentives.)

• NADCO Bulletin: SBA 504 Program Updates 2023–2024 – National Association of Development Companies, January 2024. (Highlights 504 loan program changes, including an increase in project contingency allowances, updates to 504 debt refinance rules, and the temporary fee eliminations under the Economic Aid Act extensions. Useful for lenders packaging 504 deals in 2024.) (Source: NADCO newsletter, Jan. 5, 2024)