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504 Loan Basics

What is a 504 Loan?

The most important thing to know is that if you are purchasing a fixed asset such as real estate, facilities construction or expansion, equipment, or other major fixed assets, then a 504 loan is what you are looking for.

504 loans work best for businesses falling into SBA-size ranges, and they’re especially good for owners who would like to reduce how much real estate and equipment costs them.  There are more than enough funds available.

However, the main challenge of getting a 504 Loan is that it’s only meant to fund businesses within a certain community.  The funds are provided to Certified Development Companies (CDCs), who are responsible for distributing them.

More specifically, if you are able to land a 504 loan, you might use it to fix up your existing property, improve streets, upgrade your utilities, or modernize or renovate existing facilities.

Interest rates on these loans are tied to defined increments above the current market interest rate on 5 and 10-year US Treasury notes.  Fees typically run around 3% of the total loan amount, but you can have them financed by the loan.  Typically, either your project assets or personal guarantees are used as collateral in the event you are unable to repay your loan.

Usually, you are only able to borrow up to $1 million for 10 years on equipment and for up to 20 years on real estate.  Under certain circumstances, you may be able to borrow up to $1.3 million.

At NEDCO, we help you access this low-interest funding so you can begin growing your business.

Contact us to learn more about accessing 504 financing today!