We have good news…more businesses are now eligible for SBA growth capital as SBA has taken steps to significantly improve its 504 Loan Program to better meet the needs of today’s business owners. More and more small to mid-size business owners are turning to SBA loans as a quality source of capital. Let’s dive into three recent improvements to the 504 Loan Program that are having a profound impact on business growth and stability.
Three Improvements Making More Businesses Eligible for SBA Growth Capital
Improvements to SBA 504 Debt Refinancing
In 2024, SBA made significant improvements to SBA 504 refinancing…a lending program already in high demand nationwide. Refinancing commercial mortgage(s) with an SBA 504 loan can help businesses free up trapped capital and lock in lower monthly payments. Recent changes now allow businesses to borrow more against the value of the property, get more cash out for eligible business expenses, and even refinance existing government loans, such as SBA 7(a) and 504 loans. In today’s environment of higher interest rates and liquidity issues, these changes are making it easier to capitalize on the benefits the SBA 504 Refinance Program provides.
Increases for Green Energy Loans
SBA has placed a strong focus on providing access to capital for businesses looking to increase energy efficiency or generate renewable energy. In addition to the typical benefits of 504 Loans, which include low, fixed rates, long loan terms (up to 25 years) and low-down payments, there is now no limit to the number of SBA 504 Green Energy projects, or the aggregate dollar amount outstanding. That means businesses can go green without worrying about SBA’s typical lending limits.
More Businesses Are Now Eligible
Small businesses that were previously classified as too large to benefit from SBA 504 financing may now find themselves eligible, opening avenues for growth and innovation. Eligible businesses now include those with a tangible net worth of not more than $20 million (up from $15 million), and average net income after federal income taxes for the two full fiscal years before the SBA application date of not more than $6.5 million (up from $5 million).
How Small to Mid-Size Businesses Benefit from SBA 504 Financing
As many businesses struggle to find affordable growth financing in this higher-rate environment, SBA 504 Loans are offering business owners a pathway for securing quality, below-market, fixed-rate financing. Combined with its longer repayment terms of up to 25 years and lower down payment requirements, you owe it to yourself to find out more about this incredible opportunity.
Long-Term Fixed Interest Rates
SBA 504 loans allow business owners to secure fixed interest rates that are extremely competitive, often at or below prime. Combined with longer repayment terms of up to 25 years and lower down payment requirements, it’s hard to find a better option anywhere. The SBA 504 Program allows business owners to get off the roller-coaster of variable rate loans and into predictable, long-term, fixed-rate financing.
Less Money Down
The structure of 504 loans is unique, offering lower down payments than most conventional loans…typically just ten percent. Start-ups and single-purpose facilities require a slightly higher equity contribution. There are three parties involved – your business banker (50%), a Certified Development Company (CDC) such as Growth Corp (40%), and you, the small business owner (10%). With this structure, as much as 90% of the project is financed from sources outside of your own pocket.
A Path to Ownership
The 504 was designed to make building ownership possible for small business owners by pairing it with the best terms on the market. Owning the building that is housing your business is often more cost-effective than soaring rental costs. Plus, there are long-term investment benefits of owning an asset that increases in value over time, including potential tax benefits. Furthermore…as the building owner, you’re free to customize the facility to fit your needs.
Predictable Overhead Costs
By securing a fixed-interest mortgage, your monthly principal and interest payments stay the same over the life of your loan (as opposed to rent payments, which likely increase annually; or variable-rate loans, which can fluctuate with interest-rate increases). Budgeting and long-term planning become easier with predictable, fixed monthly expenses and no future balloon payments to worry about.
Support from a Local CDC
A Certified Development Company (CDC) is a nonprofit organization that promotes economic development within its community through 504 loans. CDCs, such as Growth Corp, are designed to help strengthen local businesses by connecting them with quality financing for fixed asset investments. This, in turn, supports local economies, revitalizes neighborhoods, and breathes new life into communities. Plus, CDCs work in conjunction with local banks so you can stay with the lender you already use for your business banking.
Other benefits that prove SBA 504 Loans were specifically designed to help businesses with expansion and stability…
- The ability to include furniture, fixtures and fees
- Payment stability
- Preservation of working capital
- Protection from balloon payments
- The ability to include leasehold improvements
- Up to $5 million for the SBA portion of the loan, and no limit on the overall project size
- The ability to keep your current bank/lender
Want to Learn More?
Keep in mind, we work in conjunction with local banks…not in competition with them.
Why Growth Corp? We know small business. It’s our passion. We are proud to have helped thousands of businesses facilitate expansion. As the largest 504 Lender in Illinois, we have dedicated ourselves to making the 504 Loan Program as efficient and seamless as possible. In addition, we are an authorized Continuing Professional Education sponsor and can provide you with C.P.E. credits for our SBA 504 Loan Program update course.
Whether you’re looking to mitigate uncertainty and/or expand for tomorrow, the 504 provides a path forward. If you want to learn more, we would be happy to meet with you. Just give us a call at (217) 787-7557 or contact any member of our Lending Team.