Does your business currently lease its operating facility? Ever thought of buying, instead? There’s no better time than now. Let’s take a look at one option; the Small Business Administration (SBA) 504 loan program. In partnership with local banks, the Small Business Administration (SBA)504 loan is a three-way partnership that includes the Business Borrower, The Bank, and the Small Business Administration. It is available to help a business either purchase or refinance commercial real estate, as well as other long-term assets, such as manufacturing equipment.
Currently, 20-year fixed rates are 4.711%!. Historically low rates, coupled with the recent allowance to refinance existing commercial real estate under this program, makes the SBA504 loan one of the most attractive financing options available. Rather than traditional bank financing, this loan structure requires a much lower down payment (10%) along with a fixed, below-market interest rate. Not only can a Borrower afford the financing they need to buy, build or refinance, but they also keep more cash for business expansion. A real estate purchase with a fixed-rate SBA504 loan also mitigates inflationary rate risk and offers a lower, more predictable occupancy cost.
With SBA504, a Borrower will have two permanent mortgages: one with The Bank for 50% of the total financed amount and one with the SBA for 40% of the total financed amount. Hence, the Borrower’s contribution to the entire project is limited to the remaining portion of 10%, which, if refinancing, may even be in the form of existing equity. If you’ve ever considered owning your own building, now may just be the time for your business to give a look!
Michelle F. Lureen
VP Business Banking
The Business Bank
Legal Disclaimer: This article is intended for informational purposes only and by no means should replace or substitute other legal documents (governmental or non-governmental) reflecting similar content or advice. If you have any questions concerning your situation or the information provided, please consult with an attorney, CPA or HR Professional.