The SBA 504 loan program was created for two reasons:
- To provide financing to entrepreneurs who are ready to buy or build a facility.
- For the purpose of stimulating economic development through job creation, business growth and increased tax revenues.
A simple way to describe an SBA 504 loan is as a mortgage for small business owners to “purchase homes” for their businesses.
SBA 504 loans allow business owners to buy, build or renovate commercial real estate. Financing options include the purchase and/or renovation of an existing building; the purchase of land and construction of a new building; and also the purchase of heavy duty equipment or machinery that requires long-term financing.
Recognizing that small business owners sometimes have more difficulty getting traditional business financing but need funds to grow, the SBA 504 Loan Program is a viable financing tool for entrepreneurs to make the investment in their own facilities, continue to expand and create new jobs.
Owning a building also gives a small business owner more of a stake in the community and builds equity. The community gets the benefit of additional jobs, business growth and tax revenues from a growing small business. Similar to a residential mortgage, an SBA 504 loan is for a long term (either 10, 20 or 25 years) and the interest rate is fixed for the term of the loan. Interest rates are competitive and usually lower than market rate.