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When your business is ready to purchase a property or building, one great option for financing is to use a Small Business Administration 504 loan for your commercial mortgage. This government-backed and funded program provides great loan terms and safe financing. Here’s what you need to know:

  • The 504 Loan program was created in 2012 to provide funding to expanding small businesses.
  • It can be used to finance several types of business growth, including commercial mortgages for the purchase of existing buildings, land and land improvements, construction of new facilities or renovating existing facilities. 504 Loans cannot be used for working capital.
  • In a typically 504 Loan, the borrower puts 10 percent down on the loan, while the SBA provides 40 percent of the total business funding needs and a Certified Development Company (CDC) provides the remaining 50 percent.
  •  The maximum SBA loan amount for a 504 loan is $5 million.
  • The 504 loan terms for commercial mortgages include longer repayment terms with fixed interest rates and no balloon payments at the end.
  •  Business owners are required to give personal guaranties on the loans but the building, land or property being financed usually acts as the collateral.
  • In order to qualify, businesses must have a tangible net worth of less than $15 million and an average net income of less than $5 million during the two years preceding the application. Non-profit organizations may not apply.
  • The aim of these 504 loans for commercial mortgages is to increase job creation by the borrower’s firm or to significantly increase energy efficiency for the company.
  • The 504 loan can also be used to refinance existing commercial mortgage loans to take advantage of better interest rates and terms or to consolidate existing business and mortgage debt.

If you qualify, the SBA’s 504 loan program can be the perfect way to secure a commercial mortgage for your growing company.


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