Small business owners frequently have difficulty trying to obtain funding for their operations. They can have a hard time finding lenders who will offer them affordable loans with fair payback terms. Fortunately, there is a solution that can assist small business owners in obtaining the money they need while also benefiting lenders. The 504 loan program can be the perfect solution.
The 504 loan program is a type of financing created especially to assist small firms buy fixed assets including property, machinery, and equipment. The Small Business Administration (SBA) oversees this program, which entails two loans: one from a private lender and the other from an SBA-backed Certified Development Corporation (CDC).
Small business owners can benefit from the 504 loan program, but lenders can also benefit from it. Lenders who take part in the 504 loan program, in particular, can reduce their risks and expand their lending capacity. Let’s examine the program’s operation and the advantages for lenders in more detail.
The 504 Loan Program’s Foundations
A first mortgage loan from a private lender and a second loan from a CDC that is backed by the SBA are the two loans that make up the 504 loan program. The CDC may contribute up to 40% of the overall project cost, while the private lender normally contributes 50%. The final 10% of the project’s cost is to be covered by the borrower.
Small business owners can gain from the 504 loan program in a number of ways, including:
How the 504 Loan Program Benefits Lenders
Small business owners can benefit from the 504 loan program, but lenders can also benefit from it. Participating lenders, in particular, can reduce their risks and expand their lending capacity.