SBA 504 Loan advice from LCD Group’s Small Business Assistance Team

With the start of a new year many small business owners and entrepreneurs are working at implementing their goals for 2022.

One of the most common goals is to expand business but, for the second January in a row, many small businesses are dealing with uncertainties brought on by the pandemic, supply chain disruptions, and inflation.
“There are always uncertainties when you are planning to expand a business be it new construction or purchasing equipment. You can’t let that stop you from making the investments you need to make,” says LCD Group Senior Lending Director Ashley Hruby. “Consider them? Yes. Factor them in? Definitely. But don’t let them stop you.”

While much attention has been paid in media reports and analyses as of late to “uncertainties,” the demand for LCD Group’s small business programs tells a different story.
“Last year was one of best years ever,” says LCD Group Executive Director Brent Ekstrom. “The North Dakota Opportunity Fund, our regional lending programs, our pandemic recovery programs, and the SBA 504 loan all saw significant, if not record, demand.”
When it comes to the SBA 504 Loan, LCD Group processed more than $4.2 million in loans in 2021. Derrick Becker, LCD Group loan officer, says a lot of activity was fueled by historically low interest rates.

“There’s no doubt that low rates have been a driving force for the last two years,” adds Becker.

But rates are starting to go up. For the first time in several months all three SBA 504 Loan rates – 10 years, 20 years, 25 years – were north of three percent.
“The ten year rate is now 3.6 percent. There will be fluctuations but small businesses would be wise to factor rates over three percent into their plans,” advises Becker.
Both Hruby and Becker advise small businesses that are seriously looking at property and building updates, equipment purchases, and other capital investments to start the SBA 504 Loan process now.
“If you are looking at any kind of investments that can be covered under the SBA 504 Loan, now is the time to contact us and get the ball rolling,” says Hruby.

Hruby and Becker recommend small businesses answer three quick questions to determine if they qualify for a SBA 504 Loan…  
What will the loan be used for?

SBA 504 Loan qualifications are specific. Loans can be used for purchasing land and existing building, funding land improvements, new construction, updating existing facilities, or purchasing long-term machinery and equipment.

“Land, buildings, and equipment. If your needs fit into one of these areas, you are likely a good fit for an SBA 504 Loan,” observes Becker.

How much do you need to borrow?

The maximum loan amount under the SBA 504 Loan program is $5 million. But, as Hruby notes, businesses need to also look at their net worth and earnings.  Per requirements, eligible applicants must have a net worth of less than $15 million and annual after-tax earnings of no more than $55 million.

What is your collateral? 

The SBA 504 loan includes a personal guarantee of at least 20 percent of the loan amount. Both Hruby and Becker emphasize that, as a whole, the project itself is what is used as collateral for the loan.

“Once small businesses can answer these questions, we are well on our way to getting the ball rolling,” notes Becker who, along with Hruby, encourages business to contact LCD Group to discuss next steps.

For more information about the SBA 504 Loan, visit LCD Group’s website or contact Hruby and Becker today.