The federal Small Business Administration’s 504 Loan Program is one of the most popular and impactful small business loans available today. It’s popularity is directly related to its versatility in financing a range of expansion needs: land acquisitions, equipment, new construction, renovation projects, leasehold improvements, and covering professional fees related to architectural and engineering services.
For years, small business owners have relied on the SBA 504 Loan to make their business vision a reality. As a Certified Development Company, LCD Group assists clients in applying for and securing SBA 504 financing.
Lately, inflation and raising interest rates have caused many entrepreneurs to question if now is the right time to start a new business or expand their existing business.
LCD Group’s Senior Lending Director Ashley Hruby answers some common questions about the program.
What makes the SBA 504 Loan so unique and beneficial to small businesses?
The SBA 504 is a beneficial tool to small businesses as SBA allows for a lower down payment, a longer term without a balloon payment, and a lower than market interest rate. Utilizing the SBA 504 allows a borrower to know what their fixed payment will be for the next 20 to 25 years. The borrower will not have any unforeseen changes to the payment this allows the borrower to prepare for any future growth and consistency in their cash flows month-after-month. The SBA 504 is a powerful tool for small businesses looking to grow their business.
What impact, if any, have rising interest rates had on the SBA 504 Loan program?
Initially, we saw some reluctancy from borrowers. However, the initial shock of rising rates has worn off and the realization that rates are still reasonable has started to set in. We continue to receive inquiries on the program and request for applications. The SBA 504 has a refinance program in the event rates decrease and the benefit to the borrower presents itself.
How does the application process work? What assistance does LCD Group provide clients in applying for an SBA 504 Loan?
The SBA 504 application is available on our website. LCD Group is able to provide guidance through the entire application process. We can be as engaged as the borrower wants us to be. We can work with the business’s lender or directly with the borrower. We’re here to help in any way we can.
In comparison to this point last year, how much funding has LCD Group provided through the SBA 504 Loan program?
Despite higher rates than a year ago, LCD Group has funded one more project than this same time last year. A year ago the average SBA 504 debenture being approved was $675,000, that figure has decreased slightly to $660,000 this year. The SBA 504 has the ability to fund up to $5,000,000 to a small business borrower or $5,500,000 to small manufacturers and energy public policy projects.