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The U.S. Small Business Administration (SBA) 504 loan program has been around for a while. However, recently it’s been making the news again because its benefits were significantly enhanced with the Consolidated Appropriations Act that was signed into law on Dec. 27, 2020. You may be wondering, who is the program for? What should you be thinking about? What are the benefits? Let’s find out!
According to the SBA, “The CDC/504 Loan Program provides long-term, fixed rate financing of up to $5 million for major fixed assets that promote business growth and job creation. 504 loans are available through Certified Development Companies (CDCs), SBA’s community-based partners who regulate nonprofits and promote economic development within their communities.”
In a nutshell, it’s basically set up for you to own your own property as a business owner. If you’re buying or refinancing pieces of property (where you occupy at least 51% of it), here are the details you need to know.
- If you own property today, you can refinance it
- You can refinance an existing SBA loan which you were not able to do before the Consolidated Appropriations Act, 2021, was signed into law.
- You can refinance your property into a fixed rate for 25 years at 2.62% and the government will pay your first six months of principal and interest payments on any new loans and any refinance
- You can refinance up to 90% of the loan-to-value which tells you how much of a property you truly own compared to how much you owe on the loan you took out to purchase it.
- You can also cash out refinance up to 85% of the loan-to-value
These are all things you should think about if you’re buying a new building. If you’re already in a lease, think about buying it out or buying the space from your landlord.
At TGG, we can help you figure out a breakeven analysis to see whether or not this makes sense for you because if you can buy a piece of property, put 10% down, get a 25-year fixed loan for 2.62%, chances are that’s going to be way under any rent payments you might be making today.
After you download our package you can work with our CFOs, who are very familiar with this program, so we can help you get the money that you need to go out and buy a new building. Here are the benefits to you with the 504 loan program:
- Reduces your rent and costs
- Creates an asset for you in the long run
- Generates stability within your business
Contact us today for help with your banking package, finding an SBA lender, or help with real estate referrals. This loan is available for most businesses who make between $1-50 million in revenue. So consider this as an opportunity for you to create wealth, reduce your costs, keep people employed, and move your business forward.
This post was reviewed by our team of accounting and financial experts. TGG’s mission is to make business owners’ lives better through excellent financial management. We strive to provide the most up-to-date and objective information on accounting-related topics so our readers can make informed decisions based on factual content. All posts undergo a review process with at least one member of our Leadership Team to ensure accuracy.
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Matt Garrett is the Founder and Chief Executive Officer of TGG. He is a regular speaker across the country on behalf of Vistage educating business owners on the need for sound financial practices, and is Vice President of the Board of Directors of FINACA. Under Matt’s leadership, TGG has received the following recognition: INC. 5000 top companies in the U.S. five years in a row; one of “San Diego’s Fastest Growing Companies” the past four years; and is among San Diego’s “Best Places to Work.”
