Is a SBA 504 loan right for your business? This type of loan can be a boon to businesses with the need for tangible assets, such as building space, machinery or new construction/renovation efforts. It comes with several advantages but, as with any loan, applicants have to decide ahead of time whether they qualify. Even if they do, the terms of the 504 may not be best for them.
For owners who haven't taken advantage of capital financing before, here are a few important points about the 504 to keep in mind:
- Interest rates are fixed: Borrowers won't need to worry about changing interest rates and can plan ahead more confidently. They still depend upon the current market but can be better suited for long-term uses.
- Multiple businesses may receive a single loan: As the National Association of Development Companies asserts, some professionals can come together to establish a joint holding company to get the largest benefit out of one loan.
- Net worth matters: Eligible businesses need to have a net worth lower than $15 million.
- Recipients must have sufficient need: As the official SBA website described, a 504 loan application includes a review to determine how much the business will rely on these funds. "SBA does not extend financial assistance to businesses when the financial strength of the individual owners or the company itself is sufficient to provide all or part of the financing," it reads. "Both business and personal financial resources are reviewed as part of the eligibility criteria."
Learn more about the advantages of fixed rate loans for small businesses by contacting Growth Capital today. In addition to SBA 504, we offer guidance for the Ohio Regional 166 and Community advantage loan programs.