If you are looking for a financing option to purchase commercial real estate or other major fixed assets, then a 504 loan may be the right option for you. Here’s everything you need to know about this useful financing program.
What Are 504 Loans?
The first thing to understand about 504 loans is that they are an SBA program. As you may know, SBA stands for Small Business Administration, the government agency whose stated goal is to provide support to American small enterprises.
Together with 7(a) loans, 504 loans are one of the most popular SBA programs. 504 loans are designed to provide “long-term, fixed-rate financing of up to $5 million” so businesses can purchase major fixed assets.
What Can 504 Loans Be Used For?
We know what you’re thinking, 504 loans sound great, but what are “major fixed assets,” exactly? This broad category includes the following:
- Existing buildings or land
- New facilities
- Long-term machinery and equipment
Additionally, businesses can also use 504 loans to improve or modernize land or existing facilities, including parking lots and landscaping.
On the other hand, 504 CANNOT be used for working capital, to purchase inventory, to consolidate or refinance debt, or to speculate or invest in rental real estate.
What Is the Difference Between 504 Loans and 7(a) Loans?
We mentioned earlier that 504 loans and 7(a) loans are the most popular SBA programs. Here are the main differences between them:
| 504 Loans | 7(a) Loans | |
|---|---|---|
| Purposes | Purchase commercial real estate, purchase existing buildings, acquire long-term machinery and equipment, modernize existing facilities |
Short- and long- term working capital, refinancing current debt, purchase furniture, fixtures, and supplies |
| Maturities | 10 to 20 years | 7 to 25 years |
| Limit | $5 million | $5 million |
| Type of rate | Fixed | Fixed/Variable |
More Financing Ideas and Tips
Interested in learning more about financing and SBA loans? Then check out these previous posts for more tips and ideas:
- Discover why this is the best time to get an SBA loan
- A glossary of loan terms for business owners
- What is a bridge loan?
- What are SBA loans?
Gellyfish: Certainty of Execution in SBA Loans
Looking for SBA loans in California, or anywhere in the United States? Gellyfish is here to help. We offer financing with the certainty of execution you need to take your business to the next level.
Contact us today by email (info@gellyfishcommercial.com), telephone (877-800-4493), or social media (Facebook, Twitter, LinkedIn), to schedule a free consultation or to learn more about our full range of financing options.
