What is an SBA 504 Loan?
Are you thinking about buying real estate or long-term equipment or machinery purposes for your small business? If so, then considering a 504 loan from the SBA (Small Business Administration) will be your best bet. These loans prove immensely beneficial for many small business owners, as they offer loans below market rates and long terms.
What’s the Eligibility for a 504 Loan?
- You qualify for a 504 loan if your business has an actual net worth of $15 million or less.
- Your business should be a for-profit, active operation, and it cannot engage in passive, speculative, or nonprofit activities.
- Your business has an average net income not more than $5 million.
What 504 Loans May Be Used?
You may use 504 loans for:
- Purchasing lands, such as existing buildings
- Purchasing long-term machinery and equipment
- Making lot improvements, like grading, parking lots, utilities, landscaping, and street upgrades
- Constructing or revamping facilities
What are the 504 Loan Terms?
An SBA 504 loan normally comes with 10-year terms for equipment and 20-year terms for real estate. The maximum amount for this loan is up to $5.5 million. However, it entirely depends on your project goals. The total amount for the complete loan will depend on the project, with amounts up to $10 million.
Why Should You Use a 504 Loan?
Using a 504 loan is a good idea as it provides several benefits, including:
- Low down payment
- Low fees
- Government backed
- Own instead of lease
- Competitive interest rates
- Fixed rate
One of the lesser known loan programs by the SBA, 504 loans are composed of two loans: a conventional bank loan for 50% or more of the loan amount and a loan from CDC (Certified Development Company) for up to 40%. As a borrower of the loan, it is your responsibility to pay a down payment of at least 10% of the loan amount you are looking to borrow.
Need more information on SBA 504 loans? Biz Loan Bankers is the trusted name you can rely on.