As part of the U. S. Small Business Administrations (SBA) vision to promote and support the development of small business, it offers a number of small business loans programs specifically designed to meet the capital needs of growing small businesses. One such program is the 504 SBA loan.
504 SBA Loan is a SBA program tailored to provide long-term financing for the purchase of fixed assets, such as land, buildings, machinery, and other real estate. In a nutshell, it is loan that is geared to the entrepreneur or small business owner looking to expand his business. To fuel company job growth, small business loans are an option for a company wishing to expand.
Benefits of 504 SBA Loans
The benefits of 504 SBA loans are many. Small businesses can acquire loans often below market rates with small down payments. By enjoying a small down payment, the small business owner is able to not only conserve working capital, but retain liquidity, which is critical to positive cash flow. Additionally, the small business obtains favorable tax benefits and appreciation on real estate.
How 504 SBA Loans Work
A 504 SBA loan is a partnership with the SBA, certified development company and a lender. A certified development company is an economic development organization, which the SBA has certified to make loans through an SBA 504 loan and the Certified Development Company (504) Loan Program. The projects assets are used as collateral for the loan.
504 SBA Loan Eligibility Requirements
There are a few eligibility requirements in order to qualify for this program. For one, the small business borrower needs to meet be defined as a small business per the SBA’s definition, and use over half of the property in its own business operation during the first year of ownership. The percentages vary if the building is newly constructed and based on occupancy. Financial criteria relating to net income and net worth are other factors for qualification and eligibility.
For the record, SBA 504 loans not only help improve a local economy, but assist businesses owned by minorities, veterans and other types of small business owners as well.