SBA 504 loans are helping businesses grow, strengthen and recover

Updated 12/15/2021 2:55 PM

While the U.S. Small Business Administration and its loan programs have always played a crucial role in the advancement of small businesses, one of their key players, the 504 Loan Program, is actively helping businesses grow, strengthen and recover.

The 504 Loan Program was designed to serve as an economic development tool by providing businesses with access to quality, affordable capital while simultaneously encouraging job creation. The program is so named because it was originally created by Section 504 of the Small Business Investment Act of 1958.


This unique financing option provides small businesses with long-term, fixed-rate financing, which is most frequently used to buy, build or refinance fixed assets, usually buildings or equipment. Nationwide, in fiscal year 2021, 504 lending saw a 41% increase, fueling $8.2 billion in new capital investments for 9,600 businesses. But why, on the heels of a pandemic, would 504 lending see double-digit growth? Because the terms are unlike anything else in the market.

Access to cash

With the 504's refinancing option, borrowers can leverage their building's equity and elect to take money out for eligible business expenses, such as salaries, inventory, credit cards, etc. This is a great way to restructure, and possibly consolidate, existing debt while also accessing an infusion of cash that may be trapped in your building.

Lower monthly payments

In addition to helping businesses with immediate access to cash, 504 loans increase the availability of working capital going forward. The program's long repayment periods lower monthly mortgage payments by spreading out the amortization for up to 25 years. Plus, borrowers can save thousands by locking in today's below-prime, fixed rates. In fact, the 504's fixed effective rates have been below 3% for much of 2021.

Less money down

The structure of 504 loans is unique, offering lower down payments than most conventional loans ... typically just 10%. (Startups and single-purpose facilities require a slightly higher equity contribution.) Essentially, there are three parties involved -- your business banker (50%), a Certified Development Company, or CDC, such as Growth Corp (40%), and the borrower (10%). With this structure, as much as 90% of the project is financed from sources outside of your own pocket.

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Predictable costs

Budgeting and long-term planning become easier with predictable, fixed monthly expenses and no future balloon payments to worry about.

Most businesses qualify

Most for-profit businesses are eligible to receive 504 financing, so long as they average less than $5 million in annual after-tax profits and $15 million in net worth. Typical 504-eligible businesses include manufacturing, retail, industrial, professional offices and all types of medical facilities.

Support from a local CDC

A CDC is a nonprofit organization that promotes economic development within its community through 504 loans. CDCs are designed to help strengthen local businesses by connecting them with quality financing for fixed asset investments. This, in turn, supports local economies, revitalizes neighborhoods and breathes new life into communities. Plus, CDCs work in conjunction (not in competition) with local banks so you can likely stay with the lender you already use for your business banking.

Whether you're looking to access cash, control overhead expenses or expand to meet increased demand, the 504 has you covered and can help pave the way forward. Learn more about 504 Loans at

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