The SBA 504 Loan Program (“the 504” for short) gets a bad rap sometimes. True, the Small Business Administration has some stringent eligibility requirements and the process can be exhaustive, but that doesn’t mean it’s not attainable for the thousands of businesses that qualify every year.
Let’s look at FIVE common misconceptions regarding the 504:
Myth: The SBA 504 Loan Program takes forever
Reality: At BFC, we take the needs of every business owner very seriously. And part of that means being respectful of every business owner’s time. The SBA recognizes this too, which is why we’re able to work with the SBA and often, have a loan approved within one business day of a finished application. Typical escrow periods last 30-45 days.
Myth: The SBA 504 Loan Program is for new businesses only
Reality: The SBA 504 Loan Program is made available for a wide array of businesses seeking to purchase real estate, machinery or other capital improvements. Many of our clients are successful, established businesses with more than $2 million in annual sales. With only 10% down required, the SBA 504 Loan Program frees up cash flow for businesses to invest in new jobs and promotes local economic development. Also, some mid-sized businesses (101-999 employees) may qualify for the 504 as well.
Myth: Any business can get an SBA 504 Loan
Reality: The SBA has certain eligibility requirements for the 504 Loan Program. For example, non-profit companies, rental properties (held for investment purposes), and businesses deemed sexually prurient in nature are prohibited. For a full review of qualification requirements and to know if your business will qualify, contact us at 1-800-SBA-REAL.
Myth: SBA 504 Loans compete with bank loans
Reality: SBA 504 Loans work with banks, not against them. They’re administered by Certified Development Companies (like us here at BFC) and combine funding as followed: 50% from a conventional lender (bank), 40% from the CDC (BFC) and the remaining 10% is a down payment required by the borrower.
Myth: SBA 504 Loan Program rates are higher than conventional loans
Also, not true. Not only are SBA 504 Loan rates fixed at either 10 or 20-year terms, they are usually lower than conventional interest rates. Currently, SBA 504 rates are 4.76% (20-year) and up.
Still have questions? Contact us today at Business Finance Capital and we’d be happy to answer any questions you have. 1-800-SBA-REAL.