Business Insights: Unlock growth opportunities with SBA 504 Program
You’ve seen the headlines: interest rates are rising on everything from home mortgages to credit cards. Anyone in the market for business financing right now likely has serious concerns. However, the SBA 504 Loan Program is a smart way for businesses to move forward with their growth plans while hedging against inflation and rising interest rates.
SBA 504 loans, guaranteed by the U.S. Small Business Administration, offer long-term, fixed-rate financing of up to $5 million to buy, build, or renovate commercial/industrial facilities; to finance machinery and equipment; and/or to refinance existing real estate debt(s) into a long-term, fixed-rate loan.
Demand for 504 loans has skyrocketed in the past few years. Here are six reasons why, as interest rates rise, small business owners are turning to the SBA 504.
Long-Term Fixed Interest Rates
SBA 504 loans allow business owners to secure fixed interest rates that are extremely competitive, often at or below prime. Combined with longer repayment terms of up to 25 years and lower down payment requirements, it’s hard to find a better option anywhere. The SBA 504 Program allows business owners to get off the roller-coaster of variable rate loans and into predictable, long-term, fixed-rate financing.
Less Money Down
The structure of 504 loans is unique, offering lower down payments than most conventional loans … typically just 10 percent. Start-ups and single-purpose facilities require a slightly higher equity contribution. There are three parties involved — your business banker (50%), a Certified Development Company (CDC) such as Growth Corp (40%), and you, the small business owner (10%). With this structure, as much as 90% of the project is financed from sources outside of your own pocket.
A Path to Ownership
The 504 was designed to make building ownership possible for small business owners by pairing it with the best terms on the market. Owning the building housing your business is often more cost-effective than soaring rental costs. Plus, t here are long-term investment benefits of owning an asset that increases in value over time, including potential tax benefits. Furthermore … as the building owner, you’re free to customize the facility to fit your needs.
Predictable Overhead Costs
By securing a fixed-interest mortgage, your monthly principal and interest payments stay the same over the life of your loan (as opposed to rent payments, which likely increase annually; or variable-rate loans, which can fluctuate with interest-rate increases). Budgeting and long-term planning become easier with predictable, fixed monthly expenses and no future balloon payments to worry about.
Most Businesses Qualify
Most for-profit businesses are eligible to receive 504 financing. Typical 504-eligible businesses include manufacturing, retail, industrial, professional offices, and all types of medical facilities.
Support from a Local CDC
A Certified Development Company (CDC) is a nonprofit organization that promotes economic development within its community through 504 loans. CDCs, such as Growth Corp, are designed to help strengthen local businesses by connecting them with quality financing for fixed asset investments. This, in turn, supports local economies, revitalizes neighborhoods, and breathes new life into communities. Plus, CDCs work in conjunction with local banks so you can stay with the lender you already use for your business banking.
Whether you’re looking to mitigate uncertainty and/or build security for tomorrow, the 504 provides a path forward. Learn more about 504 Loans at www.growthcorp.com/sba504.