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SBA 504 Equipment Loans 101: Application Process & Working
SBA 504 Equipment Loans 101: Application Process & Working
SBA 504 Equipment Loans 101 Application Process & Working

SBA 504 Equipment Loans 101: Application Process & Working

There are limited equipment loans for small businesses available, but knowing your options and choosing the right one is important. In this blog, 504 Capital ( a CDC offering equipment loans in Virginia, Maryland, and North Carolina) provides detailed information on what you need to know to apply for and utilize the SBA 504 equipment loan.

How Equipment Loans Work

Many new or established businesses looking to expand their business offerings, upgrade current equipment, or purchase business equipment look to financing options as a source of capital. One of the more popular and sought-after loans is the SBA 504 equipment loan. This loan is offered by a Certified Development Company (CDC) and backed by the Small Business Association (SBA) of the United States government. However, these loans do have restrictions and can only be used in specific circumstances. 

The SBA 504 equipment loan can only be used on equipment with at least a 10-year economic life. This can include:

  • New or used machinery and equipment
  • Installation of new or used machinery and equipment
  • Construction Equipment
  • Manufacturing equipment
  • Large format printers
  • Medical/dental equipment
  • Commercial Laundry Equipment
  • Equipment that generates renewable energy or fuels Etc.

In addition, office equipment such as computers and software cannot be purchased with this loan. So, while there are restrictions, the SBA 504 equipment loan is still the most beneficial equipment loan for small businesses because it provides:

  • 10-year repayment terms
  • Up to 90% financing
  • Below-market, fixed interest rates
  • A low down payment

What Is The Process Of Applying For An Equipment Loan

The process of applying for an equipment loan is relatively simple. Firstly, the business will want to find an SBA-approved CDC in their state. There is a list of approved CDCs on the SBA website. Then, once they have chosen a CDC, the business should begin to collect the paperwork and documentation needed for the 504 loan authorization package. The documentation needed changes depending on what type of loan you are applying for, but for equipment loans, you will generally need: 

  • Business tax returns for the last three years.
  • Business financial statements.
  • Business plan.
  • Accounts payable and receivable.
  • Cost documentation (for the equipment).

What You Should Know Before Applying For An Equipment Loan

Prior to applying for a heavy equipment loan, it is a good idea to review the requirements for the loan. Knowing the requirements can help you determine if you qualify for the loan, and if not, it can give you the information needed to reach qualification. For the 504 equipment loan in Virginia, Maryland, and North Carolina, we recommend having:

  • A business/personal credit score of 680 or higher
  • Limited outstanding debt
  • Ability to meet the down payment requirement
  • Proof of ability to pay
  • A clean financial history (no bankruptcies, foreclosures, or tax liens)

Having this information and the ability to meet these standards will increase your likelihood of being approved for the loan.

Heavy Equipment Loans in Virginia, Maryland, and North Carolina

Are you ready to take the next step and apply for an equipment loan in Virginia, Maryland, or North Carolina? 504 Capital is here to help you along the way. We are a Certified Development Corporation serving the VA, MD, and NC areas. Our team of professionals has helped various businesses become successful and achieve new financial goals through the 504 loan program. Let us help you, with our heavy equipment loan. We will walk you through the application process and ensure you have all the documents needed to be successful. 

Work with us and discover new business opportunities. Call 757-623-2691 or visit us online, to see how we can help.

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