If you are an entrepreneur in the restaurant industry, then you need to be aware of all the financing options at your disposal. Among these alternatives, SBA 504 loans are one of the most convenient and effective. Let’s see why.
Understanding SBA 504 Loans
The 504 loan program is a type of loan that the SBA offers to help small businesses, including restaurants, purchase or build things like:
- Existing buildings or land
- New facilities
- Long-term machinery and equipment
- Other fixed assets
504 loans are provided by a Certified Development Company (CDC) and are structured in a unique way.
A private borrower provides 50% of the funding and the other 40% is financed by the CDC. The remaining 10% is covered by a down payment made by the business owner.
Advantages of 504 Loans for Restaurants
A 504 loan comes with a long-term fixed interest rate, which is advantageous for restaurant owners since they can predict their monthly loan payments.
Additionally, the interest rate is usually lower than traditional loans, making it a more affordable financing option.
All these benefits make 504 loans an excellent option for restaurant owners looking to acquire large fixed assets. This might include:
- Purchasing an existing restaurant
- Building new locations
- Buying restaurant equipment (such as ovens, refrigerators, industrial fryers or storage containers)
Eligibility for 504 Loans
To qualify for a 504 loan, a restaurant owner must meet several eligibility requirements set by the SBA.
The restaurant owner must have a net worth of less than $15 million and an average net income of $5 million or less for two years prior to applying for the loan.
Additionally, the restaurant must be considered a small business under the SBA guidelines. Other requirements include:
- Qualified management expertise
- Having feasible business plan
- Good character
- Ability to repay the loan
Wrapping It Up
Opening or expanding a restaurant requires significant funding, and the 504 loan program is a great option for restaurant owners who need financing.
With lower interest rates, long-term fixed rates, and a high loan-to-value ratio, 504 loans can help restaurant owners finance their dreams.
If you are interested in learning more about this loan program, contact our experts at Gellyfish Commercial today. We can help you get the funding you need to realize your business vision.
Gellyfish: Certainty of Execution in Commercial Loans
At Gellyfish Commercial, we offer commercial financing solutions with the certainty of execution you need to take your business to the next level.
We are located in Riverside, and work with clients all over California and beyond. Contact us today by email (info@gellyfishcommercial.com), telephone (877-800-4493), social media (Facebook, Twitter, LinkedIn), or through the live chat on our home page to schedule a free consultation.
