SBA 504, There’s a big advantage to you as a business owner so if you're doing a new project or you're growing into a new facility then a fixed-rate would be a good fit for you. Especially in an interest rate environment like we're in right now where, yes interest rates are low and have been for a while, but they're going to be rising over time.The SBA 504 program provides small business owners with loans to expand or buy their own commercial real estate, here’s some more benefits:
1. Better Choice than Commercial Loans
Commercial loans only benefit the lender, not you and that’s what they are made for. If you’re serious about owning commercial property and other assets a SBA 504 would be the best option for you.
2. Low Down Payment
Another big advantage with SBA 504 loan, you only need a 10% down payment to purchase the equipment or asset that you need. Many lenders require a bigger amount in order to qualify for a regular commercial loan.
3. Longer Loan Term
The SBA 504 loan can be fixed for up to a 25 year term of repayment. Most business loans are for a much shorter term, so if you need to refinance your interest rate may increase depending on the current market rate, called it for expansion (Facilities or Equipment).
So you mentioned some benefits but what can I do with a 504 loan?
The 504 loan program has strict guidelines for financing purposes. That list includes:
- Purchasing existing facilities.
- Purchasing real estate, either undeveloped or improved.
- Constructing new buildings.
- Reconditioning, overhauling, updating or otherwise making over existing buildings.
- Buying long-term machinery.
- Borrowers should note that since the loan refinance provision has expired, 504 loans can no longer be used to consolidate, repay or refinance existing debt unless it is related to expansion of facilities or equipment.
So what type of properties would be eligible for a SBA 504?
1. Real estate and equipment loans
2. Hotel / Motel
3. Restaurants
4. Apartments
5. Office buildings
6. Commercial buildings
7. Gas Stations
8. C Stores
9. Startup business
10. Self-Storage Facilities
11. Assisted living
12. Many others
In order to qualify for the 504 program, Have a tangible net worth less than $15 million and an average net income less than $5 million after taxes for the preceding two years. The SBA cap on their contributions is set at $5 million. Meet the job creation or public policy which states that the small business must create or retain at least one job for every $65,000 that the SBA guarantees. If the small business is a small manufacturer, then the ratio is increased to one job for every $100,000 guaranteed. Businesses can also increase their funding by showing that they meet public policy goals of reducing energy use or promoting alternative fuel consumption.
The benefits of the 504 program are endless but at National Commercial Property loans we understand that each business is different and so are your needs, we are all about showing you all the options so you can find a solution that truly meets your needs. Nothing would make us happier than seeing all your dreams come true.
