SBA 504 Loan Services
How It Works
An SBA 504 loan is a partnership between a Certified Development Company (CDC), the Small Business Administration (SBA) and a lender. CDCs are economic development organizations that have been certified by the SBA to make loans under the Certified Development Company Economic Development Loan Program with an SBA 504 Loan.
Working with a lender, the CDC provides up to 40% of the financing for commercial real estate purchase and new construction with an SBA 504 loan. A lender must partner with the CDC to typically provide 50% of the financing, while the entrepreneur ends up paying as little as 10% down.
The CDC works with the small business borrowers to process, approve, close and service the SBA 504 loan. Funding is provided by the CDC issuing a 10- or 20-year debenture bond that is sold to investors on Wall Street giving entrepreneurs access to capital at low, fixed interest rates – usually only available to large corporations. Debenture bonds are also attractive to investors since they are backed by the SBA and fully guaranteed by the U.S. Treasury.
With SBA 504 financing, entrepreneurs can purchase commercial real estate with a down payment as low as 10%. The small business owner not only gets the tax benefits and appreciation on the real estate, but also locks in occupancy costs for the long term with financing tailored to the entrepreneur’s needs.
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Low Down Payment & Enhance Cash Flow:
Low Down Payment & Enhance Cash Flow:With financing available for up to 90% of the project cost, SBA 504 loans offer an affordable down payment, enabling the entrepreneur to conserve working capital and retain liquidity to meet operating needs.
•Long Term Financing at Competitive Interest Rates:
Long Term Financing at Competitive Interest Rates:SBA 504 real estate financing is 20-year, fully amortized financing. This enables a small business owner to pay for a facility over the long term, avoid risky loan call provisions and enjoy lower monthly payments. For current interest rates, visit www.nadco.org and click on SBA Interest Rates.
•Predictable Monthly Payments:
Predictable Monthly Payments:SBA financing allows small business owners to fix their business occupancy costs with an attractive, 20-year, fixed interest rate.
•Ownership Options Tailored to Meet Small Business Owner Needs:
Ownership Options Tailored to Meet Small Business Owner Needs:An entrepreneur can purchase and hold title to a building personally, in the name of the business or even set up a holding company for the real estate. This gives the small business owner the flexibility to maximize tax benefits of ownership and minimize liability in the manner best suited for the entrepreneur and his company. Additionally, two or more small businesses can receive an SBA 504 loan if they combine to create a real estate holding company. For instance, this option works especially well for professionals in the medical, veterinary, legal and accounting fields.
If you are considering buying a commercial property please feel free to contact Robert Dodge or fill out the form below.
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