Using SBA 504 Loans for Commercial Real Estate

Most small business owners require financing at some point, because you need working capital to stay afloat. The growth of small businesses is good for the economy, and therefore there has been legislation to encourage business expansion to create jobs and stimulate commerce in a city or state. The Small Business Administration offers long-term Low interest loans as an incentive for small businesses to expand their operations and the hire more people. The terms of SBA 504 loans are often beneficial and provide advantages that may not be available to an individual borrower.

What to Expect from a SBA 504 Loan

The Small Business Administration offers long-term fixed rate loans for businesses. These loans can be used for new facilities and to purchase additional equipment. The lender will cover 40% of costs up to $5 million. Usually the prospective borrower is expected to put down 10% of their own money, but an additional 50% of the loan can be secured from a bank or private lender. These loans can often be paid off over a 20 year period. The one disadvantage of this type of loan is that it requires a lot of paperwork and involves a significant amount of bureaucracy. You will have to provide extensive information, however, receiving good terms on this kind of loan may be well worth the effort.

What This loan Is Used For

SBA 504 loans are valuable for businesses that have been hit by natural disasters or other kinds of damage that interrupted operations and destroyed property. In addition, it is a good way to replace your equipment to improve efficiency. In fact, many lenders are eager to extend loans for equipment updates because this means more revenues for your small business and greater likelihood of your paying off your loan. To secure a loan, you may have to provide the statements about your company including projected earnings and losses and the description of new products and services you are planning to release. You may get an incentive for creating jobs and may be considered an attractive loan candidate if you have been successful in job creation in the past.

Applying for SBA 504 loans involves significant paperwork and patience, but your efforts will pay off in the form of a loan for your small business with low interest rates and a long period of repayment. If you can show that your business expansion will improve the efficiency and create jobs, you are likely to be successful in securing an SBA loan.

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