As a company owner, you may be familiar with the term “504 refinancings,” but do you understand what it means and how it might help your company? Let’s look at the fundamentals of 504 refinancings and how it might benefit your business.
A government-backed loan program called 504 offers small enterprises long-term, fixed-rate financing for purchasing fixed assets, including land, buildings, and machinery. The U.S. Small Business Administration (SBA) oversees the program, which aims to promote economic growth and employment creation.
The ability for small firms to finance up to 90% of the cost of purchasing fixed assets through the 504 loan program, with the remaining 10% being paid by the borrower, is one of the program’s advantages. The loan’s duration might be between 10 and 25 years, and its interest rate is often lower than that of conventional finance.
504 Refinancing: What Is It?
Small firms can refinance their commercial mortgage debt using the 504 refinancing loan program. This can be very advantageous for companies that have existed for a while and have accumulated equity in their fixed assets, such as land or buildings.
Businesses that have already secured a 504 loan for the purchase of fixed assets and have been current on their payments for at least the previous year are eligible for the 504 refinancing program. The original 504 loan’s outstanding sum, as well as any new debt accrued for the same fixed assets, might both be included in the refinanced loan.
Refinancing a 504: Advantages
There are several advantages to 504 refinancings that can lower debt and increase cash flow for small businesses.
For small businesses seeking to lower their debt, increase cash flow, and make investments in their operations, 504 refinancings can be the perfect solution. Companies can gain from reduced interest rates, longer loan terms, fixed interest rates, and even cash-out refinancing options by refinancing their current commercial mortgage with a 504 loan.
Working with a lender familiar with the 504 refinancing programs and who can help you with the application process is crucial if you are a small company owner interested in the program. It’s also essential to assess your company’s financial status and decide whether 504 refinancing is the best option for you.