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...
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SBA 504 Loan
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Traditional Loan
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Loan Amount
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up to 90% financing of the total project cost (land, construction/renovations, soft costs, closing costs)
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75-80% of appraised value or purchase price, whichever is less
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Equity
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10% of the total project cost |
20-25% plus closing and soft costs |
Term
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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
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1st Mortgage: 20 or 25 years 2nd Mortgage: 20 years. |
15 years |
Pricing
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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 loan
Eligible Project Costs for SBA 504 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