Is the SBA 504 Loan Right for You? A Closer Look
During the coronavirus pandemic, the SBA (Small Business Administration) became very popular. However, they do more than just offer pandemic assistance.
An SBA 504 loan provides affordable financing for real estate-related purchases or large equipment. Thanks to its low interest rates, fairly low down payments, and long terms, these kinds of loans are great for small business owners who want to make big purchases. You just need to make sure that you can afford to wait for the funding and qualify for it.
Similar to many other small-business loans from the government, an SBA 504 loan has strict requirements and an application process that is very long. Closing can take many months.
Thankfully for you, we are here to help you figure out if the SBA 504 loan is right for you. So keep on reading and we will take you through everything that you will want to know!
Who Can Qualify for an SBA 504 Loan?
A borrower needs to meet general SBA loan requirements for eligibility. The applicant also needs to meet requirements that are specific to the SBA 504 loan program. In order to be eligible for an SBA 504 loan, you need to run a for-profit business that operates in the United States.
Your net worth needs to be less than fifteen million dollars and you need to have an average net income of no more than five million dollars for the previous two years.
When it comes to general SBA loan requirements, you first need to meet the SBA definition of what a small business is. You also need to be current on all government loans. This includes federal student loans.
You also need to have good credit.
What Can an SBA 504 Loan Be Used For?
An SBA 504 loan can be sued to buy fixed assets that promote job creation and business growth. These assets can include a new machine, equipment, or a new building.
You also can use an SBA 504 loan to upgrade or make facilities. These can include parking lots, streets, and utilities. Unlike other general term loans, this kind of loan can’t be used as working capital.
You also can’t use this loan to invest in rental real estate, refinance or repay debt, or buy inventory.
How Do You Get an SBA 504 Loan?
When it comes to working with the SBA 504 program, you need to find a Certified Development Company. These nonprofit economic development groups will process your application.
They will also help with financing and send the loan to the SBA.
The Importance of Knowing If the SBA 504 Loan Right for You
Hopefully, after reading the above article, you now have a better if the SBA 504 loan is right for you. As we can see, certain businesses can benefit greatly from these kinds of loans, especially if they spend the money wisely.
Make sure to check out the rest of our site for more helpful business articles today!
