What are SBA 504 Loans?

The Small Business Administration, or SBA, offers 504 Loans that a USA-based business can use to grow. In this article, we will look at what a 504 Loan can do for your business, as well as the advantages vs. disadvantages. 

What are SBA 504 Loans? 

Before we dive into what an SBA 504 Loan can do for your business, let’s first define what a 504 loan is. This is a long term, fixed rate loan that is provided for businesses that are planning to purchase equipment or commercial real estate. The amount of the loan can be up to $5.5 million and the repayment period will either be 10 years or 20 years. In order to provide these loans, the SBA will partner with CDC, Certified Development Companies, which are non-profits that are focused on advancing economic development within their own communities. 

In order to qualify for an SBA loan, your business must meet certain criteria: 

Be for-profit
Net worth under $1.5 million 
Average income less than $5 million for the previous two years
Be able to repay loan with business income 

Now, let’s look at the advantages vs. disadvantages of the SBA 504 Loans. 

Advantages of 504 Loans 

Following are a few of the advantages of 504 loans- they can be a good decision in some cases. 

Large amounts 
Affordable interest rates 
Easy qualification process 

Disadvantages of 504 Loans 

While it’s true that the SBA 504 Loans are a great option for many small businesses, there are also some disadvantages that you must keep in mind. 

Must create jobs with funding 
Restrictions on usage 
Percentage of loan covered by the applicant 

When it comes to funding for small businesses, the SBA 504 Loan is a great option because it allows a business owner to expand without incurring a major debt. To get started, you’ll want to examine your business and project to ensure that you meet the qualifications for an SBA 504 Loan. If you believe that you qualify, please contact JHF Capital today to help you get started.