SBA 504 Loans
SBA 504 Loans
The Small Business Administration (SBA) 504 Loan Program is a financing option designed to help small businesses acquire fixed assets such as real estate or equipment. This program aims to promote economic development and job creation. Here’s a detailed look at the SBA 504 Loan Program:
Key Features of SBA 504 Loans
- Loan Structure
- Interest Rates
- Loan Terms
- Eligibility
- Use of Funds
Benefits
- Lower Down Payment: With as little as 10% down, businesses can preserve working capital for other needs.
- Fixed Interest Rates: The CDC portion has a fixed interest rate, providing predictable monthly payments and protection against interest rate increases.
- Long-Term Financing: Terms up to 25 years reduce monthly payments and align the loan term with the useful life of the asset being financed.
Application Process
- Pre-Qualification: Determine eligibility by consulting with a local CDC.
- Loan Application: Submit a loan application along with required documentation, such as financial statements and business plans.
- Approval: The CDC reviews the application and forwards it to the SBA for approval.
- Funding: Upon SBA approval, the commercial lender and the CDC disburse funds for the project.
Key Participants
- Certified Development Companies (CDCs): Nonprofit organizations that promote economic development and are certified by the SBA to provide 504 loans.
- Commercial Lenders: Banks or credit unions that partner with CDCs to provide the first lien loan.
The SBA 504 Loan Program is a powerful tool for small businesses looking to invest in significant assets while maintaining healthy cash flow and securing long-term, stable financing. For more detailed information and to start the application process, contacting a local CDC or the SBA directly is recommended.
