Advantages of 504 Loans
- Lower down payment requirements
Higher loan-to-value ratios allowed by 504 loans make qualifying easier. Business can borrow up to 90% of their financing needs thus preserving their cash.
- Fixed interest rate
504 loans carry a below market fixed rate for the life of the loan. Fixed rates help maintain consistent cash flow in a fluctuating economy.
- Longer repayment terms
SBA repayment periods are longer than most conventional loans with 10 and 20 year terms. This makes monthly loan payments more affordable and helps to improve cash flow.
- Lower collateral requirements
Due to the 504 loan guarantee, collateral may be less critical in loan qualification decisions.
How a 504 Loan works
- Bank Financing
Bank participates for as little as 50% of the project costs at competitive rates
and terms due to strong collateral position.
- 504 Loan
Finances up to 40% of project costs with a maximum of $5,500,000.
- Company Injection
Company contributes a minimum down payment of at least 10%, freeing additional
cash for other business purposes
