SBA 504 Interest Rates | July 2024 | 10 Yr:  6.493%, 20 Yr: 6.277%, 25 Yr: 6.206% *rates may vary Learn More »

5 Reasons Why You Should Use the SBA 504 Loan Program

Jan 14, 2020

Maybe you read an article about it online, or had it recommended to you by a fellow small business owner.

Perhaps your lender discussed it as an option with you at your last meeting or you saw something about it online. Whether you’ve heard the term a thousand times, or this article is the first, you may be asking yourself “What’s the big deal about the SBA 504 loan program?” We’re here to let you in on the secret and share with you why we think you should consider the SBA 504 for your next project.

The SBA 504 loan program is a program authorized by the U.S. Small Business Administration to help promote economic development and retain quality jobs in communities throughout the United States. Through this program, small businesses work with three parties to secure up to $5.5 million in financing for long-term fixed assets (commonly including real estate or equipment). But what does this mean for your small business?

Here are five key benefits this unique program can have on your business:

  1. Finance up to 90% of your project’s cost – The SBA 504 loan program is unique because it works with three individual parties – a third party lender (50%), the SBA (40%), and the borrower (10%). With this starting structure, as much as 90% of the total project is financed from sources outside of your own pocket, which is at least 10% more than the average conventional loan program covers.
  2. Improve your cash flow for business operations – The SBA 504 loan program offers 10, 20, and 25-year term options. These longer terms allow you to spread out your payments, leaving more for your business’ cash flow in its day to day operations.
  3. Save thousands of dollars – Interest rates for the SBA 504 loan program are fixed, below-market rates that you won’t find anywhere else. In 2019, the rates were historically low, falling to less than 3.5%. Since these rates are fixed throughout the life of the loan at a below-market value, you save thousands of dollars compared to interest rates for conventional loans or variable interest rates.
  4. Keep your pockets full – There’s no need to empty your pockets with the SBA 504 loan program. The program requires a minimum of 10% down – a down payment that is over 15-20% lower than most conventional loans. Instead of paying that much money up front, you can keep your pockets full and continue to keep it for your daily business operations.
  5. Accomplish your goals and achieve your dreams/write your success story – The SBA 504 loan program is a good solution for small businesses when lenders don’t want to take the risk. The unique financing package allows businesses to work towards their goals of starting, managing, or growing their business in a partnership where all parties benefit. Using this loan program will put you well on your way to achieving your dreams and continuing along the journey to success.

As you can see, the SBA 504 loan program can not only help you finance your projects costs, but can also same you time, money, and headaches along the way. Whether you’ve heard about it before or today was the first time, we hope you can now walk away knowing about one of the best kept secrets in the lending world today.

If you have questions about the SBA 504 loan program, want to know some more information, or are thinking about utilizing one for your next small business project, contact one of our loan officers in ND, MT, or western MN.

***BONUS Reason!

Stack your resources for additional interest rate savings – The Bank of North Dakota PACE or Flex PACE programs can be stacked on top of an SBA 504 loan. Structured similarly to an SBA 504 loan, these programs offer an opportunity to buy down the interest rate even more, giving you an even better deal for your business.