If you are a small business owner, building your own commercial property or expanding your existing facility offers many advantages over leasing space, and a Small Business Administration (SBA) 504 Loan Program is often the best way to finance the construction. By building your own commercial facility, your monthly payments build equity in your business instead of going into a landlord’s pocket. With a 504 loan, your occupancy costs are stable, unlike annual rent increases, because your payments are fixed. No surprises!
Best of all, since monthly payments as an owner are typically less than rent, you’ll be able to preserve cash. This enables you to put more money back into your business, hire new employees, and focus on growth. Additionally, the 504 Loan Program allows you to keep more of your working capital than most commercial loans available on the market.
Let’s take a look at how the SBA 504 Loan Program can benefit your business as you build or remodel:
Less money down – You are typically only required to make a 10% down payment. Conventional commercial construction loans may require a down payment contribution as high as 30%!
Fixed, long-term interest rates – Fixed interest rates, which are historically low right now, combined with generous loan terms of up to 25 years, can mean significant savings over the life of the loan. (See Long-Term Fixed Rates Aren’t Just for Residential Mortgages)
Covers a range of construction costs – You can finance construction costs, closing costs and soft costs, including architectural fees, engineering fees, surveys, title insurance and more. Don’t forget that furniture, fixtures, landscaping, signage, parking lots, and equipment can also be included.
Capitalize on a larger facility – You can purchase a larger facility than you currently need, as long as it satisfies the owner-occupied provisions of SBA financing. The occupancy requirement of a building purchase is 51%. The occupancy requirement is different on a ground up construction project.
Lower fees on bigger projects – Unlike an SBA 7(a) loan, the fees associated with the 504 loan are typically much lower.
Building or renovating your own commercial building can be a wise financial move and getting an SBA 504 loan to finance the construction is even better. Learn more about our SBA 504 Loan Program or contact us today.
Sunshine State Economic Development Corporation (SEDCO) is a not-for-profit certified development corporation (CDC) licensed by the U.S. Small Business Administration to offer the SBA 504 Loan Program throughout the state of Florida. SEDCO can provide your expanding small business with alternative financial resources, sound financial advice, and business acumen. Helping small business succeed is our business. For more information, visit our website or contact us.