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How SBA 504 Loans Compare to Traditional

Whether you're a lender or professional who wants to give options to your business clients or a business owner who wants to know more about SBA 504 loans and traditional loans for new buildings, renovations, and equipment, here's what you need to know about SBA 504 loans...

 
SBA 504 Loan 
Traditional Loan 
Loan Amount 
up to 90% financing of the total project cost (land, construction/renovations, soft costs, closing costs) 
75-80% of appraised value or purchase price, whichever is less 
Equity 
10% of the total project cost  20-25% plus closing and soft costs 
Term 
1st Mortgage: 20 or 25 years
2nd Mortgage: 20 years.  No balloons or rate resets. 
Frequently, 5, 7, 10, or 15 years then balloons 
Amortization 
1st Mortgage: 20 or 25 years
2nd Mortgage: 20 years. 
 15 years 
Pricing 
1st Mortgage: Competitive fixed or variable rates.
2nd Mortgage: Usually 0.5-0.75% less than competitive rates and fixed for 20 years.

The least expensive financing available to most small business owners for commercial real estate. SBA 504 loans are assumable.
Competitive fixed or variable rates. Usually not assumable. 

SBA Loan Benefits 

The benefits of SBA 504 loans can have a major impact on business owners by preserving precious capital, having longer terms to pay back the loan, and needing only 10% down compared to 20-25% required on traditional loans. See all the benefits of an SBA 504 (REAL) loan

Eligible Project Costs for SBA 504 / REAL Loans

  • Land
  • Site Improvements
  • Facility: Acquisition, Conversion, Expansion or Renovation, New Construction
  • Machinery and Equipment: Acquisition and Installation
  • Professional Fees Directly Attributable and Essential to the Project
  • Interim Financing

SBA Changes Improve Access to 504 and 7(a) Loan Programs

May 13, 2014

SBA Recently Issued the "Final Rule"

While we all know that rulemaking is never Read more ...

North Metro Market Insight: Bombshell or Sleeping Beauty?

April 1, 2014

Start, Relocate, or Expand a Business in the North Metro

CMDC partnered with Premier Commercial Properties and MetroNorth Chamber of Commerce to offer insight on the North Metro Minneapolis business and real estate market.

Read more ...

The Downside of Paying? Off Your Commercial Loan? Early?

 March 11, 2014

Choosing Pay Off vs. Increasing the Value of Business

Many business owners are anxious to pay off their loans early. However, if your loan terms are very favorable, such as having a fixed low interest rate over a long term like an SBA 504 loan, keeping your loan and investing that money elsewhere for Repairs, Maintenance, Added Inventory, or Expansion may be a better financial decision. Keeping your loan intact can increase the value of your business and can possibly increase your income.

Read more ...

SBA Changes Name of 504 Loan Program to Real Estate Advantage Loan Program (REAL)

February 20, 2014

What's in a Name?

The new name identifies better with the CDC/504 loan for its eligible uses of major fixed assets, like real estate. Borrowers and bank lenders should keep in mind however, that the REAL Program can also be used to finance machinery and equipment. For eligibility questions contact CMDC loan officers today.   

Read more ...

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