Why Are SBA 504 Loans Gaining Popularity?

Post Updated:

The financial aspect of running an enterprise is one of the most confusing subjects for many business owners. Most new and seasoned business owners do not know which direction to turn when getting proper funding. Many make grave mistakes that cost them a lot in the short and long run. Therefore you should learn about SBA 504 loans, one of the U.S. Small Business Administration’s flagship programs, and why they have become popular today. The points below will give detailed information about the benefits of this type of financing to help you learn more.

Guidance through the financing process

One of the material contributors to the increased SBA 504 loan popularity is working with a Certified Development Company (CDC) to ease the process of submitting an application. CDCs are the experts in the 504-lending application process. When you work with an experienced CDC, you will be guided down the path to achieving the desired result, funding of your loan, with the least amount of disruption and frustration. Pick the wrong partner to guide you and you may end up frustrated and without the necessary funding to expand and grow your business.

Two of the Advantages of 504 SBA financings

More Lenient Repayment Terms
504 loans have terms of up to 25 years for real estate purchase, construction, expansion and refinance without balloons or the necessity of obtaining a new appraisal after five years. Equipment with a useful life of less than 20 years can typically be financed on a 10-year loan, again, without balloons or rate adjustments.

Lower Down Payments
One of the biggest reasons small businesses are flocking to the SBA 504 loan is the ability to reduce the cash injection to purchase, expand, or construct a facility and/or equipment. Typical conventional loans have a down payment requirement of 20% or even 25%, whereas the SBA 504 loan is as little as 10% and some closing costs can be rolled into the financing. In some instances, an additional equity injection of 5% or 10% may be required but those instances are easily explained by your MCDC Loan Officer.

Operating a business with inappropriate or improper financing is perilous and can lead to the untimely demise of the enterprise. Cash conservation is one of the most important reasons to look at SBA 504 loans. Reducing down payments and stretching loan amortizations with fixed interest rates for up to 25 years brings the cost certainty most business owners are seeking…especially in a rising interest rate environment like we have today. Contact MCDC today for all the details you need about the best financing for your business.