When To Use SBA 504 Loans For Small Businesses

For many small businesses, securing a loan can be quite difficult. If you do not have an established history of making payments on time, many banks are reluctant to provide funding. However, there are several other ways to purchase the inventory you need in order to get the business off the ground. The Small Business Administration offers the SBA 504 program for the sole purpose of helping new businesses thrive.

Understanding the SBA 504 Loan

While SBA 504 loans do not serve as a way for small businesses to gain access to working capital, this type of loan is still incredibly helpful for new businesses. If you’re a small business owner who is a woman, veteran, or minority, you might be eligible to qualify for this exciting loan program. The SBA 504 loan is meant to help new business owners finance vital assets for the business, like lots, land, and buildings. If you’re eligible for SBA 504 loans, you’ll benefit by securing a fixed interest rate on the financing.

Using the SBA 504 Loan

If you’re interested in applying for SBA 504 loans, it’s important to understand exactly what this loan can be used for. Unlike a traditional short term or long term loan, the SBA 504 loan will not provide you with a lump sum of money to be spent however you wish. If your primary goal is to receive working capital, then you’ll need to explore other avenues to achieve this goal. On the contrary, if you simply need help purchasing the building that your business will be located in or the land that will house your future business, the SBA 504 is perfect for you. In addition to helping finance the cost of land or structures, the SBA 504 program can help new business owners with renovations to an existing building or the purchase of important equipment and machinery.

Eligibility for This Loan

In order to qualify for SBA 504 loans, you’ll need to meet the strict criteria for eligibility. The Small Business Association is primarily interested in helping small businesses, which are defined as having a net worth of less than 15 million dollars and income that’s less than five million dollars per year. Even if your business fits the criteria, the SBA 504 loan is not applicable for businesses that are non-profit or lenders. If you believe that you’ll qualify for this type of loan, apply as soon as possible in order to gain access to this extremely helpful form of financing.


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