Why the SBA 504 Loan works so well and why small businesses should consider applying for it

Inflation, supply chain disruptions, labor shortages, and predictions of a possible recession continue to dominate economic news coverage. So it is easy to be overwhelmed by all the doom and gloom in the news.

But for many small business owners and entrepreneurs, the need to expand one’s business and make necessary capital investments are ever present. And, for many, delay is not an option.

Fortunately for them – and all other small business owners – there’s the SBA 504 Loan. 

Millions of small businesses across America, and hundreds throughout North Dakota, have benefited from this program.

It’s simply one of the best loans available for small businesses. Yet for every small business owner who knows about the program, there are scores of others who are unaware of it or have only a vague idea about how it works. For them, we offer this primer on the program.

“The Loan that Grows America”

Often referred to as the “loan that grows America,” the SBA 504 Loan is provided through a Certified Development Company (CDC), such as Lewis & Clark CDC, which is part of Lewis & Clark Development Group. 

SBA 504 Loans provide small businesses with fixed rate financing for the purchase of long-term assets such as: 

– Acquisition of buildings or land,
– Purchases of machinery and other equipment
– Costs of new construction or renovation,
– Professional fees (such as engineering and architectural fees),
– Leasehold improvements, and more.

Why SBA 504 Loans Are Attractive and Affordable

SBA loan rates are consistently some of the most affordable in the industry, making them attractive to both lenders and small businesses. They are also among the most straight-forward loans.

SBA loans come with a partial government guarantee, which mitigates a lot of the risk that lenders take on when providing SBA loans. This mitigated risk allows SBA lenders to provide funding with lower interest rates.

For this reason, the SBA 504 Loan should be seen as really two loans. The first loan comes from an applicant’s bank, which is responsible for approximately 50 percent of the financing. The second loan comes from the CDC, which funds around 40 percent of the loan. The applicant is responsible for the remaining ten percent in the form of a down payment on the loan.

Every month, CDCs submit closed loans to the SBA, which then pools the loans together and sells them to investors. The investors provide the capital that actually funds the loans. 

SBA 504 Loan Requirements 

In order to qualify, business applicants must meet the following criteria:

– Have a tangible net worth of less than $15 million
– An average net income of less than $5 million for the previous two years
– The ability to repay the loan
– A practical business plan

Nonprofit organizations and those businesses engaged in passive or speculative activities are not eligible for SBA 504 Loans.

If you are looking to grow and invest in your small business and you meet the above requirements, then do yourself a favor by clicking here to learn more about the SBA 504 Loan and then contact LCD Group’s SBA 504 Loan Team.

Let LCD Group help grow your small business today.

SBA 504 Client Success Stories:

“We could not have been able to start our business without the SBA 504 Loan.”

SBA 504 Loan helped transform prairie land into unique wedding and event venue

Legendary Meets benefits from SBA 504 Loan, helps owner make business dream a reality