Is an SBA 504 Loan Right for Your Next Business Investment?
Buying a building. Purchasing major equipment. Constructing a new facility. When your business is ready to make a significant investment, how you finance that next step matters.
An SBA 504 loan is designed to provide long-term financing for major fixed assets that support business growth. For the right small business owner, it can be a valuable alternative to conventional financing.
What can an SBA 504 loan be used for?
SBA 504 financing can be used for eligible projects including purchasing land or an existing building, constructing or renovating a facility, making property improvements, and purchasing qualifying long-term machinery or equipment. Certain qualified debt may also be eligible for refinancing.
It generally cannot be used for working capital, inventory or investment in rental real estate.
How does an SBA 504 loan work?
A typical 504 project brings together three parties: a private lender such as a bank, a Certified Development Company (CDC), and the small business borrower.
A common structure includes up to 50% of the project financed by the bank, up to 40% through the CDC/SBA-backed portion, and at least 10% contributed by the borrower. Requirements can vary depending on the business and project.
The SBA-backed portion offers long-term, fixed-rate financing with 10-, 20- or 25-year maturity options depending on the asset.
Who may qualify for an SBA 504 loan?
Eligible businesses generally must operate for profit in the United States, meet SBA eligibility and size requirements, demonstrate an ability to repay the loan and use the financing for an approved purpose.
Why does an SBA 504 loan work well for certain businesses?
The program can be particularly useful for established businesses making a substantial long-term investment. Maybe you're ready to stop leasing and purchase your own property. Perhaps your operation requires an expensive piece of equipment. Or your growth plans include expanding or constructing a new location.
The important part is determining whether a 504 loan actually fits your business and your goals.
At All Capital Bank, we believe that conversation should start with a banker who takes the time to understand your business. Whether you're considering SBA financing or another lending option, we're here to help you evaluate the possibilities and determine the right next step.
Because when your business is personal to you, it should be personal to your bank, too.
