Obtaining an SBA 504 loan is a smart business decision in any economy, but right now is the time to capitalize on historically low interest rates and ensure the success of your investments for years to come.
One of the biggest benefits of government-backed SBA 504 loans offered only through a Certified Development Company (CDC) like 504 Capital is that they offer lower interest rates than business loans funded by traditional financial institutions. And right now, rates continue to trend lower and lower. As of July 2020, SBA 504 loan interest rates were set at 2.41% for a 25-year fixed rate, 2.34% for a 20-year fixed rate and 2.39% for a 10-year fixed rate. Of course, those rates will fluctuate, but experts agree they aren’t likely to rise any time soon.
504 Capital President Brent Swanson explains that rates tend to follow the 10-year Treasury Rate. “There are other factors, but that’s the one in a stable market that you look at, and it’s been very steady at .6% or .7% every month,” he says. “That’s our gauge at where rates are going, and it wouldn’t be expected it would fluctuate up because the economy won’t change dramatically.”
Of course, low interest rates are only one of the many advantages of SBA 504 loans. Besides being the only loans in the country backed by the U.S. government, they offer many helpful benefits, especially appropriate for businesses struggling due to the challenges such as having to cease operations or cut back on staff because of the COVID-19 pandemic:
-In 2018, a 25-year fixed term was added to the financing options along with 10- and 20-year loans. This allows small business borrowers to have lower monthly payments and additional cash flow.
– For existing businesses going into a multi-purpose building, 10% down is all that is needed to get started. This helps them protect working capital, especially crucial during a crisis, when many haven’t been able to operate at normal capacity and have decreased revenue.
An additional opportunity is to refinance with cash out. Borrowers can also use equity to access capital that may not have been able to access through the Paycheck Protection Program (PPP) or Economic Injury Disaster Loans (EIDL). Terms are up to 25 years for eligible businesses who have debt at least two years old that can be paid in a timely manner. Up to 85% financing is based on appraisal and up to 20 percent of appraised value is available as cash out for qualifying business expenses like utilities, payroll, rent, or inventory.
If you have been thinking of applying for an SBA 504 loan, there is no better time to act. 504 Capital Corporation can provide SBA loans for businesses in Virginia, D.C., Maryland, and North Carolina. If you need financing and are interested in locking down an unprecedented interest rate, give us a call or visit 504Capital.com today to learn more.
