In this video, Pursuit Regional President Tom McHale reviews the benefits of the SBA 504 program. The 504 program makes loans for commercial real estate even more affordable.
The program can be used to purchase owner-occupied commercial real estate, fixed assets, and to refinance eligible business debt. It’s a great option for business owners because it offers:
- A low down-payment for the borrower
- Fixed interest rates, and
- Longer repayment terms
What is a 504 loan?
A 504 loan is a second mortgage that’s made in addition to a first mortgage loan through your bank. The 504 portion will be administered by a Certifed Development Company (CDC), like Pursuit, who is certified and regulated by the SBA.
Though the program includes two mortgages, the time to funding is about the same as using a bank-only loan, and there’s significant savings for you as the business owner.
For a typical 504 project, your bank will provide 50% of the financing, the CDC will provide 40%, and you’ll need to put as little as 10% down.
Key features of the 504 program
The first key feature of the 504 program is the low down=payment. Depending on your project, your down-payment could be as low as 10% of the total project cost. That mean you can receive up to 90% financing for your project, and keep more money in your business to support its growth.
The 504 program also features a low, fixed interest rate. 504 interest rates are typically lower than other financing options, which will save you significant money over time.
Because the rate is fixed at the time of funding, you’ll have a consistent monthly payment that allows you to more accurately plan for the future.
Finally, we have the longer repayment term. The 504 loan program offers terms from 10 years to 25 years, with the total financing spread out over that period of time. Longer terms create lower monthly payments, which makes financing for commercial real estate and fixed assets more affordable through the 504 program.
If you’d like to learn more about your options for commercial real estate loans, get in touch with us today.