A Quick to the SBA 504 Loan

Running a small business can prove financially challenging. In order for you to see the best results from your efforts, you want to take time to research the various financing options available to you. Understanding where to turn when you need access to capital can play a big part in your overall success. Some smaller businesses may want to think about applying for the SBA 504 loan. Look over these details to see whether or not this is a good fit for your needs.

Overview

All financing options aim to serve different needs. This loan is released by the Small Business Administration and is structured to assist smaller companies with expenses related to business growth. This loan is typically used to cover the costs of real estate investments or purchasing new equipment. Some companies also apply the funds toward making upgrades to the function or appearance of a workspace. If your business is looking to take on any of these endeavors, then applying for this specific financing option may be a beneficial decision for your company.

Application Process

The funding for this loan comes from three different sources. First, you apply a 10% down payment. Next, the SBA provides 40% of the funding through a certified development company. Finally, the rest is supplied through a traditional lending institution like a bank. The amount you borrow will depend on what you are looking to do with the funds, though the limit through most organizations is about $5 million. In order to qualify for the SBA 504 loan, you must have exceptional credit and be able to demonstrate your fiscal responsibility through business and financial documentation.

Additional Requirements

There are other requirements you must meet in order to be considered an eligible candidate for this loan. The tangible net worth of your company must be valued at under $15 million and you must also have had a gross average income of less than $5 million in the two years leading up to the application process. Due to the involvement of the Small Business Administration, the funds must also be applied toward a project that helps expand or create jobs and invigorate the community in some positive ways.

Understanding your financing options can make a big difference when your company is in need of funds. When you are looking to cover the expenses related to a large investment like purchasing real estate, consider applying for an SBA 504 loan. If you meet the requirements, this loan can help you with a number of important moves for the future of your company.

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