Purchasing land is an essential part of many business ventures. With that in mind, in today’s blog post, we dive into the details of what you need to know about using an SBA 504 loan to buy land.
Can You Use an SBA 504 Loan To Buy Land?
Yes, you can use an SBA 504 loan to buy land. In fact, the stated purpose of 504 loans is to aid in the purchase of assets that promote business growth and job creation, including:
- Existing buildings or land
- New facilities
- Long-term machinery and equipment
However, as with any financing option, there are specific requirements and guidelines to follow. In general, you are required to:
- Operate as a for-profit company in the United States or its possessions
- Have a tangible net worth of less than $15 million
- Have an average net income of less than $5 million after federal income taxes for the two years preceding your application
- Meet other SBA standards
To be eligible for this type of financing, you must include the land and building purchase within the scope of your project. You must also show that the land and building will generate enough income to support the repayment of your loan.
What You Need To Keep in Mind
One of the significant benefits of using an SBA 504 loan to buy land is that it offers a long-term (10, 20, or 25 years), fixed-rate financing option. This means that you can benefit from stable monthly payments and no rate adjustments over the life of your loan.
Additionally, you’ll only need to make a 10% down payment, which can help you preserve your cash flow while accessing the funds you need to purchase and develop your land.
Before applying for an SBA 504 loan to buy land, it’s important to understand the specific guidelines, requirements, and structure of 504 loans.
You’ll also need to work with a Certified Development Company (CDC) to determine your eligibility, prepare your application, and secure funding.
Wrapping It Up
In conclusion, the SBA 504 loan can be an excellent financing solution for small business owners looking to purchase and develop land for commercial use.
By using this loan program, you can benefit from long-term, fixed-rate financing. However, it’s important to seek professional assistance to ensure that you meet the eligibility criteria and fully understand the process of using an SBA 504 loan to buy land.
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.
