For small business owners looking to invest in real estate, equipment, or machinery to help their companies grow, the Small Business Association (SBA) Section 504 Loan Program offers many advantages over traditional loans, while also benefiting the local community and reducing risk for lenders.
According to the SBA, the Section 504 Loan Program is a “win-win-win for the small business, the community, and participating lenders.”
A Win for Small Business
A 504 loan can provide small businesses like yours with much needed financing that may not be as available to get elsewhere, and offers a wealth of benefits such as:
Owning your own property (no rent increases, tax savings, building equity)
Low, fixed interest rates
Long-term financing (20 to 25-year terms for real estate)
Low down payment (typically 10%)
Fewer out-of-pocket costs and fees than traditional loans
Can finance larger or riskier projects
Fast processing
A Win for the Community
SBA 504 loans require borrowers to create one job for every $65,000 they receive in funding, and this has created over 2 million jobs since 2012. Our 504 loans boost economic development for communities by:
Creating and retaining jobs
Stimulating local economic growth & reinvestment
Encouraging competitive free enterprise
Maintaining local consumer spending
Increasing consumer confidence
Supporting the development of minority, women and veteran-owned businesses
Growing business districts
Revitalizing economically disadvantaged areas
Driving innovation
A Win for Lenders
The 504 financing program also mitigates risk for lenders by creating a three-party partnership:
A private institution, such as a commercial bank, typically provides 50% of a total project’s financing. The bank holds a first mortgage lien position on the assets being financed, providing them with an incentive to offer reasonable terms and favorable rates. Since they are only responsible for half of the funding, they risk losing less money should a borrower default.
A certified development corporation, such as SEDCO, finances up to 40% of the project with full SBA backing.
The small business usually contributes only 10% of the total project cost, which represents a substantial savings of working capital.
Because 504 loans minimize the risks for lenders, they are more likely to approve small businesses that might not qualify for a traditional business loan.
If you are interested in growing your business while benefiting the community at the same time, we would love to help! We’re experts in helping companies get the funding they need as quickly and easily as possible. Contact us to learn more.
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.