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OWN INSTEAD OF LEASE
An entrepreneur can build equity while securing stability. Once the building or equipment is paid off, a business can enjoy the same revenue without paying a monthly property expense or may even rent the space out to other businesses for a profit.
VALUE
With a 504 loan, an entrepreneur can purchase his or her businesss real estate or machinery. He or she then gets the tax benefits and appreciation on the real estate while locking in occupancy costs for 20 years.
LOW DOWN PAYMENT
As an entrepreneur, you know the importance of liquidity. With financing available for up to 90 percent of project cost, the 504 loan offers a 10 percent down payment (compared to 25 or 30 percent through a traditional bank), enabling the entrepreneur to conserve working capital.
GOVERNMENT-BACKED
The SBA (Small Business Administration) created this program to increase the accessibility of business property loans to entrepreneurs, helping enhance the economic health of local communities.
LOW FEES
Alliance CDC encourages interested small businesses to compare SBA 504 loan fees to fees of other loan options on the market, including other SBA-backed loans such as the popular 7(a). What you will find is that 504-loan fees are the lowest on the market.
LONG TERM FINANCING
The 504 loan means up to 25-year, fully amortized financing. This enables a small business owner to pay for a facility over the long term while avoiding risky loan call provisions typical of traditional lenders.
COMPETITIVE INTEREST RATES
The 504-loan boasts low-interest rates that vary based on market forces. The actual interest rate the borrower pays is calculated based on the debenture rate for the month the loan is funded. SBA 504 loans are funded by monthly bond (debenture) sales to investors on Wall Street.
FIXED-RATE
SBA 504 loan financing allows an entrepreneur to fix his or her business occupancy costs rather than worry about market instability or fluctuating rates.
FLEXIBILITY
An entrepreneur can purchase and hold title to a building personally, in the name of the business, or even set up a holding company for the real estate. This gives the small business owner the flexibility to maximize tax benefits of ownership and minimize liability in the manner best suited for the entrepreneur and his company. In some circumstances, two or more small businesses will receive a single 504 loan if it suits them to combine to create a real estate holding company. This option works especially well for professionals in the medical, veterinary, legal, and accounting fields.
ELIGIBILITY
Unbelievably given the advantages, most businesses worth under $15 million are eligible for a 504 loan for their property and machinery needs. This includes projects as costly as $5,500,000 of 504 financing depending on the nature of said project.