504 SBA Loans Explained

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The Small Business Association is known for providing various types of funding to help small businesses. Funding options vary, including specific research, growth, and other funding. According to Fundera, about 48% of small businesses have their financing needs met, making access to additional funding essential for these companies. Today, 504 SBA loans are quickly gaining popularity because they help businesses thrive. Let’s take a closer look.

They’re Long-Term

These loans are designed to be long-term, ensuring businesses can meet their financing needs without struggling to pay back high loan payments. Often, companies enjoy a fixed 504 SBA rate. The 504 loan rate may be fixed for up to 20 or 25 years, depending on the loan and the company you get it through.

They Come From CDCs

Loans do not come directly from the Small Business Administration. Instead, they are issued by CDCs, which stands for Certified Development Companies. The SBA takes the time to certify and regulate companies to ensure everything is fair. These companies are community-based and work to make loans available to businesses in the local community to encourage economic growth.

They Have an Eligibility Criteria

Only certain businesses are eligible for a 504 loan. Understanding the eligibility criteria is essential before looking into things like a 504 SBA rate. Businesses have to operate in the United States and be a for-profit company. They must have an income of less than $5 million to $6.5 million and a total net income of less than $15 million to $20 million. Most businesses must have a business plan and be able to prove they can pay back the loan.

Community Development Companies can also use their methods to determine whether a business is eligible for a 504 business loan. Most companies will want to ensure they have a solid management team and look at how long the company has been in business. They’ll consider factors like this to ensure the company doesn’t go under after they get a massive loan.

They Have Restrictions

It’s essential to understand that a 504 SBA loan can only be used for certain things. It can be used to purchase new land or equipment for an expansion. Many businesses use them to improve existing structures. However, funds can’t be used for working capital, renting real estate, or consolidating debt.

The process for applying for SBA loans can quickly get confusing. Many people want to know how to apply and have questions about a 504 SBA rate. Our company can help you gain access to the funds you need. Contact us for more information today.

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