Lender Advantages of an SBA 504 Loan

The SBA 504 loan scheme, offered by NEDCO, presents small enterprises with a reliable and affordable financial solution for expansion and development. This loan program supplies businesses with enduring, below-market, and fixed-rate capital for the construction or renovation of facilities; and also for the acquisition of real estate, machinery, and equipment. The SBA 504 loan package is essentially a blend of two separate loans, one offered by NEDCO, and the other from a commercial lending institution, such as a bank or credit union. By teaming up with NEDCO for an SBA 504 loan, lenders can deliver an extra financing option to their small business clientele, while simultaneously reducing collateral risk.

AdobeStock_566631791 Lender Advantages of an SBA 504 Loan

The SBA 504 loans provided by NEDCO cover up to 40% of the permissible project expenses. Meanwhile, the participating lender contributes a first mortgage loan that usually accounts for 50% of the project, holding a first lien position on the asset being funded. The terms set by the commercial lender mandate a minimum duration of 10 years on real estate or a 7-year term on machinery and equipment. The commercial lender is also responsible for deciding the interest rate, fees, and terms, provided they align with SBA’s established guidelines. Furthermore, the commercial lender extends interim financing or a bridge loan during the project’s construction phase.

Upon completion of construction or when the borrower is ready to finalize the purchase, NEDCO, in collaboration with the SBA, furnishes the necessary funds through an SBA-secured second mortgage in a second lien position. This procedure enables the payoff of the interim loan and furnishes permanent financing for either a 10 or 20-year term at an appealing, fixed interest rate. Consequently, commercial lenders can retain a 50% loan to value ratio while fulfilling the requirements of their small business customers. In addition, this arrangement allows the business borrower to maintain more working capital and continue to expand their operations.

Partnering with NEDCO to utilize the SBA 504 loan program can provide numerous benefits for both lenders and their small business customers. For lenders, the program offers a way to assist their clients in achieving their business objectives while minimizing risk. For small businesses, the SBA 504 loan can provide the capital necessary to grow and succeed in today’s competitive marketplace. With NEDCO, lenders have a partner who understands the needs of small businesses and is committed to providing innovative financing solutions that support their growth.

In a rapidly changing business environment, it’s important to have a partner who understands the unique needs of small businesses. At NEDCO, we believe in empowering small businesses by providing them with the tools and resources they need to thrive. With our SBA 504 loan program, we are not only helping businesses grow, but we are also helping build a stronger, more vibrant economy. For lenders looking for a way to better serve their small business clients, partnering with NEDCO and the SBA 504 loan program is an excellent choice.