If you’re a small business owner and looking to expand or modernize, you may need financing - everyone could use a little help these days! What you don’t need is an unpredictable adjustable-rate loan, or one that you have to start worrying about paying back right away. Owning your own business is stressful enough - financing should make your life EASIER!
That’s where the SBA Section 504 Loan Program comes in. SBA 504 loans are designed specifically to help small businesses like yours with long-term, fixed asset financing such as real estate purchases, construction, renovations, equipment, and machinery.
The 504 program was developed to drive economic development in the community and create jobs. To this end, the program offers a number of significant benefits to small businesses such as a fixed rate for the life of the loan and generous loan terms from 10 years for equipment to 25 years for real estate.
The SBA 504 rate is based on the current market bond rate at the time of the debenture sale. Since the Federal Reserve cut interest rates earlier this year to help the economy recover from the impacts of the COVID-19 crisis, rates are at a historic low. As of October 2020, the 25-year fixed rate is 2.58%, the 20-year rate is 2.55% and the 10-year rate is 2.47%.
You probably have already heard of the SBA’s most utilized loan program, the SBA 7(a). While this program can provide funding for a business’s general needs such as working capital or inventory, it may have higher rates (fixed or adjustable), typically requires significant collateral, and may be associated with higher fees. (See a comparison chart of SBA 7(a) vs. SBA 504 loans) If you are looking to finance long-term fixed assets for your business – especially real estate, the 504 loan program may offer you the most favorable terms.
Additionally, the 504 loan program creates a three-way partnership between your business, a private lending institution (such as a bank) and a certified development corporation (CDC). That’s where we come in. A bank typically finances 50% of the loan, we finance 40% of the project through the SBA and your business only contributes 10%. That means you receive 90% financing of your project, have more working capital available to keep your business running, and you are able to help your community all at the same time!
Interested in how a 504 loan can help your business grow, yet make your life easier? We’d love to help. We’re experts at this stuff. Contact us today and let’s get started.
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.