SBA 504 Commercial Loan Program

The SBA 504 loan program is one of the best commercial real estate loans in the industry for business owners that are interested in purchasing commercial real estate. Primary benefits include, low down payment at 10% and some of the lowest fixed interest rates in the business. Amortization periods can be as long as 25 years as well.

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The 504 is essentially two loans, the first lien position loan is funded by a conventional bank, the second lien loan is the CDC or SBA loan. The CDC piece is normally fixed and amortized over 20 years (a huge benefit in and of itself). The bank loan ranges in terms like any conventional bank loan, though most are amortized over 25 years (30 years is still possible) with fixed periods ranging from 3, 5 to 10 years (rare but still out there). The banks loan sits at 50% loan to value and the SBA loan covers 40% loan to value. The borrower contributes the last 10%, via the down payment.

Another major benefit to the SBA 504 loan is how the down payment is calculated compared to conventional loans. The down payment is factored off the "total project cost", meaning fees like closing costs, 3rd party costs, renovation costs, etc. can be rolled into the loan and the 10% down payment is factor off that total amount. This is called the "total project cost". As a comparison, most conventional bank loans have the down payment calculated off of the purchase price, than all other fees/cost go on top of the down payment. This substantially increases the amount of cash borrowers have to put into the transaction. This is a very important point that should not be quickly brushed off. Most conventional loan programs do not have this ability to include fees, equipment, construction cost, etc into the loan amount.

Another interesting point is that borrowers typically see a 10-20% reduction in their real estate expense by owning rather than leasing. In addition, due to long term fixed rates borrowers have less concerns over future rate increases or future increases in rental payments.

The SBA 504 commercial loan programhelps small business owners keep cash in their business and offers them long term fixed rates with the lowest down payments in the business. Fill out our Pre Approval form now to get started.

Note we also do SBA 7a Loans, which you may want to examine.

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Commercial Finance Advisors, Inc.

261 E Maple Rd
Birmingham, Michigan 48009