10 Years: 4.365%
20 Years: 3.983%
25 Years: 4.090%
SBA 504 can do 90% financing
Conventional loan rates may be lower, but they typically cover no more than 75% – 80% of the project cost, are for a shorter term, and almost always include a final balloon payment.
SBA 504 Rate is Fixed
Bank loan rates are expected to rise and are generally variable in nature, and credit standards for small businesses will probably tighten.
SBA 504 is less expensive than other forms of financing
Business owners look at the fixed rate, low down payment, and long term of the 504 loan. They find that when they take into account the cost of 504 over the entire term of the loan, it was actually less expensive than other forms of financing.
SBA 504 can do a maximum $5 million loan on a $12.5 million project
The business owner still gets a 10% down payment. Given a 20 year term (and if a bank would do a fixed rate at prime) the owner may save substantially in payments over the term, by using the 504 Program.The SBA 504
Rate is competitive
Most businesses find that when their 504 loan closes the rate is usually competitive with other financing, and sometimes a lot better. They see that the 504 benefits – 90% financing, with a fixed, long-term rate – make 504 best for them.
HCDC Loan Officers make the process easier
Certified Development Companies (CDCs) were created to do the SBA paperwork for the borrower. Most business owners have found that the SBA paperwork is not much more than that required by banks – and CDCs make it easy because they are the experts in doing these types of loans.
Monthly payments are lower with SBA 504
Most Business owners find it more valuable to take advantage of 504’s low monthly payment. They keep their cash for working capital to grow their business and as a cushion against inflation. The Program offers a 20 year term on fixed asset financing.
SBA 504 is flexible
For the business owner who feels certain their business will not need the extra cash for working capital, the Program may be able to structure their loan as a 10-year term (and the bank’s portion at 20 years). This alleviates any prepayment premium on the 504 portion after the first five years of the loan.
Borrowers who may qualify for conventional bank financing are choosing to use SBA 504
It’s a competitive market. Often, what is best for the business owner is offering them 90% financing with a long term that will benefit them by freeing up their working capital and lowering their debt service and down payment.