What Is an SBA 504 Loan?

An SBA 504 loan. That’s when Syrian Ballerina Astronauts from Ship 504 perform for Space Shuttle inhabitants and don’t expect to be paid back right away.

No. It definitely isn’t that.

You’re not very good at Balderdash.

Who’s playing Balderdash?

No, who’s on first.

Oh my gosh. You’re impossible.

Fine, fine. If you insist, we’ll tell you about the loan.

An SBA 504 loan is a type of loan from the Small Business Association that deals with real estate only. This is a great option if you’re looking to buy a new building or build a structure for your business. With an SBA 504 loan, the SBA finances 40% of the deal, a traditional bank will finance 50% of the deal, and you will only have to put down 10% of the cost of the building. This gives you the highest percentage of financing possible on a building, and also minimizes risks all around, encouraging banks to work with you since they are only on the hook for 50% of the loan.

Wow. A straight answer. Was that so hard?

Yes. It pained us with every word. But since it’s our job – and we’re already halfway there – let’s give you a rundown of some of the benefits and drawbacks of an SBA 504 loan.

The upsides:

  • Highest leverage available for real estate purchasing
  • Longest loan terms
  • Lower rates

 

The downsides:

  • Paperwork-intensive application
  • Tougher and longer approval process
  • May require collateral

 

Additionally, you should know that there are both fixed-interest and variable-interest options available, the loan term will be 20-25 years with monthly payments, and because of the low rates and long term, an SBA 504 loan usually has the lowest payments available.

That sounds amazing!

It’s a fantastic loan to get, for sure. In fact, if you fill out our magical online application, you could qualify in 15 minutes! That is, unless you want to play some more games instead?

Yeah…no. I’m going to go apply now.