Ready to grow your business? Consider the SBA 504 loan



Posted12/12/2019 1:00 AM

The core mission of the Small Business Administration (SBA), and their partner certified small business lenders, is to support the entrepreneurial dream. Access to capital is a critical component in bringing small businesses, many that start as just an idea, into reality.

To support this mission, the SBA offers four categories of loans: 7(a) working capital loans, microloans, disaster loans and 504 fixed asset loans. These programs provide much needed capital to small businesses, but the 504 stands out for its beneficial borrower terms.


Established in 1958, the SBA 504 loan has a long track record of success for small business owners looking to buy, expand or refinance a commercial building or heavy equipment. The program was designed specifically to support business growth and includes strategic capital considerations.

The program terms set it apart from any conventional loan on the market. A 504 loan offers up to 90% financing for established businesses. This means that the borrower only needs to put down 10% of the total project cost. The lender puts forth 50% while the SBA, through a certified development company (CDC), covers the remaining 40%.

In addition to a lower down payment, borrowers have the option of 10, 20 or 25 year loan terms available at below market fixed interest rates. Loans closing in the month of November at a 25-year term had an effective rate of 3.74%. In 2019 the rate dropped multiple times to the lowest in program history. Borrowers also enjoy predictable and lower monthly payments.

Most importantly, this financing structure frees up working capital to reinvest back into growing the business. Plus, owning your commercial property, rather than leasing it, is a great way to enhance both personal and business wealth.

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Public-private partnership

The SBA 504 loan is truly a public-private partnership and shouldn't be considered a loan of last resort. While there is some upfront paperwork in order to participate in this program, an experienced participating lender and CDC, along with a prepared borrower, can navigate the process in about the same time as a conventional loan.

The structure of the program reduces exposure for the participating lender, which can be a bank, credit union or other non-profit. The loan being guaranteed by the SBA inherently encourages traditional lenders to increase their small business lending, extending access to capital opportunities to borrowers who may not be a fit for a conventional loan.

Industry agnostic

Manufacturing, health care, restaurants, franchises, hospitality, retail, day cares, breweries -- all these industries and more can utilize a 504 loan. The program may be a good fit for any small business looking to purchase land, space or fixed assets.

Startups welcome

Access to capital for startups can be especially daunting, but startups are eligible to apply for the 504 program. Startups are required to put between 15-20% of capital down, dependent on the type of real estate being purchased, but they also have access to the below market rate interest terms.

To learn more about the SBA 504 loan program and whether it is a good fit for your business, visit

• Kimberly Brisky is the Managing Director of Communications & Engagement for SomerCor, a Small Business Administration Certified Development Company.

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