An SBA 504 loan is backed by the Small Business Administration and can help businesspeople buy (or upgrade) necessary equipment, business real estate or other crucial assets. This SBA loan offers up to 25-year terms, with a low (10 or 15 percent) down payment.
SBA 504 Loan Details
This type of SBA loan is made up of:
- A bank, loaning half the funds. (Banks set their own terms for their part of the loan.)
- A certified development company (CDC), approved by the SBA, loaning another 40%.
- The borrower, supplying the remaining 10 percent as a down payment. (For startups or designated “special use” property, the down payment is 15 percent.) The down payment is about half of what a traditional bank loan might require.
Where to Get Down Payment Funds for Your SBA 504 Loan
You may use your personal savings, your assets, or retirement savings in some cases. You could also take out a personal loan to cover the down payment if you qualify. In certain cases, you can use other types of business indebtedness as down payment, if that other loan doesn’t come due until after your SBA is due to be paid off.
How to Qualify for an SBA 504 Loan
In order to qualify for an SBA 504 loan, you’ll need to meet the following requirements:
- Good personal credit score (at 650 or above) with no bankruptcy recently
- Low debt
- Established business or a startup with an excellent personal credit score
- Available down payment of 10 or 15 percent
- Eligible loan purpose. The business must create new jobs, or retain them, at your business or within the community. In some cases, your business can contribute to other government-approved goals.
Other than creating jobs, worthy and eligible goals could be:
- Helping the local economy
- Helping to redevelop an area (written plan required)
- Increasing opportunity for minorities or veterans
- And more
If you’re interested in an SBA loan, contact the experts at Mossberg Strategic Capital today.