What’s the SBA 504 Loan Program?

sba-loansAs a small business owner you may have heard about SBA Small Business Association) loans, but didn’t really know what they were or how they relate to your financing needs.  There are many different kinds of SBA options.  The SBA 504 loan program is one that can help small business owners purchase real estate, equipment, or expand their current facility with low down payment and at a fixed rate.

The SBA 504 program allows small business‘s to purchase fixed assets with a down payment of 10 to 15% (compared to a standard minimum of 20% using conventional bank financing).  The program structures this type of loan the following way:  The bank portion equals 50% of the project, the SBA portion equals 35-40%, and there is a 10-15% down payment required depending on the type of collateral and whether or not it is a start up business.

In addition to the lower down payment requirements, this program also offers fixed rate financing of up to 20 years for the SBA portion of the loan.  As of February 2013, the rate was 4.29%.

The closing costs for the SBA 504 program are higher than traditional bank financing, so it is not appropriate for all situations.  We sit down with prospective borrowers before submitting the SBA loan application to see if it makes sense to pursue.  Feel free to contact me, Patrick France (715.241.0400) or my colleague Sean Strahota (715.359.4231) with any questions regarding the SBA program.