Your growing business is evolving and you’re starting to think about putting down permanent roots in your community.
Commercial real estate offerings are ripe for the picking, you even have an eye on a really nice piece of land for sale. The problem is that you’re struggling to secure credit for your big move because you lack the monstrous down payment most banks require from small businesses. What’s a SMB to do? Call the Small Business Association, of course!
What is a 504 Loan?
In short, the 504 loan is designed to help young businesses buy real estate.
With reasonable terms, low down payments and great interest rates, they’re perfect for a small business willing to work up a feasible business plan to present with its application. 504s are a great option for business owners who have neither the funds nor the credit to support the kind of loan it takes to buy commercial property.
With a 504 loan, most companies with a net worth of less than $15 million and a net income less than $5 million for the last two years may be eligible.
You can also use it for a wide range of real estate activities, including:
- Buying commercial real estate. Buying land for sale or existing structures is the main function of the 504 loan, but not everyone realizes both are possible. You absolutely can buy whatever type of real estate suits your company’s goals.
- Improvements. Along with your property, you can also purchase improvements like street improvements, utility upgrades or installation, parking lot construction and even landscaping. Other improvements may also be allowed.
- Remodeling. Buying an old building doesn’t mean you’re stuck footing the remodeling bill out of pocket. Your 504 will let you roll those costs in, as well. This way you can save a little on an older building or elbow into a hard to enter location.
- New construction. Of course, you don’t have to remodel an old building, you can have one built to spec. If you want a special building in a special spot, your 504 is ready to help.
- Equipment purchases. If you need large machinery or equipment to run your business and the equipment is expected to last at least 10 years, it may be eligible to be covered by your 504.
The great news about the SBA’s 504 loan is that you can quit your landlord sooner rather than later and create a space that’s truly yours. Investing in your own structure is the first step to true security as a small business, so make sure to ask your SBA contact about this loan product if you’re considering purchasing commercial real estate.