SBA 504

In 2018, The Small Business Administration made a substantial change to the SBA 504 Program, one of its most popular loan programs. The SBA made 504 loans available with a 25-year maturity to complement the 10- and 20-year 504 Loan options.

Small businesses, the Certified Development Company industry and the third-party lenders had emphasized the need for an affordable, fixed-rate instrument with a term more closely resembling other longer-term mortgages and the SBA finally delivered.

To have a 25-year fixed-rate in a rising interest rate environment is very advantageous to entrepreneurs looking to expand their business.

What does this mean for small business owners?

“This option for extending the payment cycle by an additional 60 months gives small business borrowers the opportunity for lower monthly payments, which can significantly help their cash flow,” said Linda McMahon, SBA Administrator. “This increased flexibility in their loan terms will put them in a better position to manage their capital and face challenges like rising operating expenses.”

What is the SBA 504 Program?

The SBA 504 loan program allows business owners to finance equipment and other fixed assets, such as fixtures, furnishings and machinery, in conjunction with purchasing real estate property. Machinery, equipment and other assets that have a useful life of 10 or more years can be purchased with an SBA 504 equipment loan independent of real estate.

• As low as 10% down preserves working capital
• Below-market fixed interest rates
• Terms of 10 to 25 years, based on useful life of the equipment
• No maximum loan amount (unlike 7a loan), so it’s flexible enough to meet your needs