As most small business owners know, the federal government does not itself issue loans to applicants, but they do guarantee such loans up to about 85% of the value of the loan. This makes lenders much more willing to approve a loan request than they would be without government backing. In the case of an SBA 504 loan, loans are used to support the economic development of a given community. Thus, if you were to open up a new physical therapy clinic in your community, it would be seen as a good step in community development, and you might be eligible for a 504 loan. Continue reading to learn more about how SBA 504 loans work.
How an SBA 504 loan works
SBA 504 loans are long-term loans that offer fixed-rate financing for the purpose of acquiring or updating assets like real estate, or perhaps to purchase needed equipment for your business. The maximum amount of money you could borrow under this program is $5.5 million, and they have their own standard structure. Loans like this are usually funded to about 40% by the government, 50% by a lender, and 10% by the borrower. Keep in mind that the SBA will only fund this kind of loan if you can demonstrate that it will provide some long-term benefit to the community.
The duration of 504 loans can be for either 10, 20, or 25 years, and the interest rate will be tied to the five or ten-year rate of US Treasury notes. This typically amounts to about 3% of the amount being financed. In most cases, it will be necessary to come up with a 10% down payment, although there are certain cases where this amount will be higher. You can expect to pay several fees, including SBA and CDC fees, as well as the bank fees associated with the loan.
Looking for an SBA 504 loan?
Not everyone offers SBA 504 loans, so you’ll probably have a limited number of lenders you can work with to secure one of these loans. Contact us at My Commercial Capital if you’re in need of a 504 loan and want to work with a reliable and trustworthy lender.