Advantages of the SBA 504 Loan
Low down payment. In most cases, just 10 percent. Lets you
preserve your cash for your working capital. .
Fixed rate on the SBA 504 portion. You don't have to worry
about the prime lending rate going up. You can plan because you
know the amount of your mortgage payments for the next 20 years.
Long term. SBA 504 loans are for 10 or 20 years. Because
the CDC/SBA is in a second lien position, the bank or other lender
doing the 50 percent first mortgage loan is willing to lend at a
longer term. Longer terms make your monthly payments lower.
Low interest rate. Even with all the fees and closing costs
included in the rate, it is still a low rate for a subordinate mortgage
loan, particularly for small business. The blended rate between
the bank portion and the SBA 504 portion makes the project affordable
to the borrower.
The 504 program encourages banks and other lenders to make loans
in first position on reasonable terms, helps them retain growing
customers and provides Community Redevelopment Act credit.