Five Little Known Facts About SBA 504 Loans

The core mission of the Small Business Administration (SBA) is to support the entrepreneurial dream. The SBA provides free business counseling, federal government contracting, disaster loans, and SBA guaranteed business loans.

SomerCor is proud to operate as an SBA certified, non-profit small business lender. Through the SBA, we specialize in helping small business owners looking to buy, expand or refinance a commercial building or equipment. The SBA 504 loan supports businesses in growth mode and includes strategic capital considerations.  A Certified Development Company (CDC), like Somercor, and a traditional lender, partner to help a small business owner obtain the loan.

While many may be familiar with the loan terms and below-market fixed interest rates, here are five little known facts about SBA 504 loans that may make it a great fit for your business:

Startups are eligible to apply! The 504 loan program is not limited to established businesses. Startups must put between 15-20% down, dependent on the type of real estate purchase. But unlike a conventional loan, they still have access to below market rate interest terms.

The SBA 504 loan program is available a broad range of businesses. Manufacturing, healthcare, restaurants, hospitality, retail, daycares, breweries –  and more may be eligible for a 504 loan. The program may be a good fit for any small business looking to purchase land, space or fixed assets.

Franchise locations are small businesses too! The 504 may help you finance your franchise business. Prospective franchise owners can review the SBA Franchise Directory to confirm eligibility. The loan is used to purchase real estate, update or expand an existing franchise location to meet brand standards.

Businesses can refinance existing debt from a commercial loan. Businesses in operation for at least two years with a loan used to acquire a 504 eligible asset – land, space or fixed equipment – can apply for the refinance program. The refinancing program allows for the re-amortization of debt into a below-market, fixed interest rate loan. There is also an option to include a cash-out portion to cover short-term operating expenses. The end result is a lower monthly payment and more capital available to reinvest in the business. Here’s a great example of a SomerCor client that took advantage of the refinance program and lowered its monthly mortgage payment by 23%!

Interest rates are among the lowest in program history! In FY2019, the interest rate on the 504 loan reached a new record low. Rates have been consistently at or below 3% since May 2020. For small businesses considering the purchase or refinance of fixed assets, the 504 program is a very favorable financing option.

Download the program flyer and connect with a member of SomerCor’s loan origination team today to learn more!