What is an SBA 504 Loan?

The Small Business Administration (SBA) 504 Loan program provides financing for major fixed assets, such as real estate or equipment.

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Introduction

The 504 Loan Program provides financing for major fixed assets, such as land and buildings, that create or retain jobs. SBA 504 loans are available in 10- and 20-year terms, with the possibility of a 10-year renewal. Who is eligible for an SBA 504 loan? Small businesses that create or retain jobs may qualify. The business must occupy at least 51% of the project’s space.

Projects must fall under one of the following categories:

-Manufacturing
-Commercial real estate
-Energy conservation
-Pollution control

To learn more about eligibility and how to apply, please visit the SBA 504 Loan Program page on the SBA website.

What is an SBA 504 Loan?

The Small Business Administration (SBA) 504 Loan program is designed to provide financing for the purchase of fixed assets, which usually includes real estate, buildings, and equipment, with a life of 10 years or greater.

The SBA 504 Loan program is specifically for small businesses that might not otherwise be able to obtain financing on reasonable terms and conditions. The loan program is also intended to promote economic development and job creation/retention by assisting small businesses with long-term, fixed-rate financing.

To be eligible for an SBA 504 Loan, a business must:
-Be authorized to do business in the United States
-Have a tangible net worth not exceeding $15 million and an average after-tax net income not exceeding $5 million for the preceding two years
-Use the loan proceeds for fixed asset acquisitions (i.e., real estate, buildings, and/or machinery & equipment) with a useful life of 10 years or more

What are the Benefits of an SBA 504 Loan?

The Small Business Administration (SBA) 504 Loan Program provides financing for the purchase of fixed assets, such as land and buildings, with long-term repayment terms. SBA 504 loans are typically offered at a lower interest rate than other types of loans, making them an attractive option for small businesses.

The SBA 504 Loan Program is designed to promote economic development and job creation by providing financing to small businesses for the purchase of fixed assets. SBA 504 loans are available for the purchase of land, buildings, and equipment, with a maximum loan amount of $5 million. The interest rate on SBA 504 loans is typically lower than other types of loans, making them an attractive option for small businesses.

Some of the benefits of an SBA 504 loan include:
-Long-term repayment terms
-Fixed interest rates
-Lower down payment requirements
-No prepayment penalties
-Ability to finance up to 90% of the project cost

How to Qualify for an SBA 504 Loan

In order to qualify for an SBA 504 loan, you must:
-Use the loan proceeds for fixed asset purchases, including real estate, machinery, and equipment
-Operate as a for-profit business
-Occupy at least 51% of the newly purchased or renovated real estate
-Create or retain one job per $65,000 in borrowed funds (for manufacturing businesses)

How to Apply for an SBA 504 Loan

The first step in applying for an SBA 504 loan is to work with a participating lender. You can find a list of participating lenders on the SBA website.

The lender will work with you to complete the application and provide the necessary documentation. Once you have submitted your application, the SBA will review it and determine if you are eligible for the loan.

If you are approved, the loan will be sent to a closing agent who will disburse the funds to you. You will then have up to 10 years to repay the loan, with interest rates fixed for the life of the loan.

Conclusion

The SBA 504 Loan is a great option for business owners looking for long-term, fixed-rate financing. It can be used to purchase or improve real estate, machinery, or equipment. The terms and conditions of the loan are very favorable for borrowers, making it an attractive option for business owners.