SBA 504 Lending-Equipment Loans

How to purchase heavy equipment with an SBA 504 loan?

SBA 504 loans are ideal for purchasing heavy equipment and machinery. The one stipulation you need to be aware of is that the equipment purchased with an SBA 504 loan must have at least a 10-year economic life. It does not cover the purchase of office equipment such as computers or software.

Another benefit of using an SBA 504 loan is that it provides long repayment terms. While traditional commercial mortgages are five- to 10-year loans, the Certified Development Company (CDC) portion of an SBA 504 Loan has a 20-year term for real estate.

One of the biggest benefits of using an SBA 504 loan for heavy equipment purchases is that it offers long repayment terms. Most commercial loan loans for heavy equipment only have a five- to 10-year term. The Certified Development Company (CDC) portion of an SBA 504 loan has a 10-year term for equipment.

To qualify for an SBA 504 loan, you must meet the following conditions:

  • Credit Score—You need to have a credit score of 680 or higher
  • Limited Outstanding Debt—Your Debt Service Coverage Ratio should be no lower than 1.25
  • Down Payment—You must be able to satisfy the down payment requirement
  • Proof of Payment Ability—You will be required to show that you can reasonably afford the monthly payments of your loan
  • Clean Financial History—In addition to not having a lot of outstanding debt, you should also not have a history of recent bankruptcies, foreclosures, or tax liens.

   
When you’re ready to ramp up your heavy equipment needs, contact us. 504 Capital Corporation has an Accredited Lenders Program (ALP) designation for Certified Development Companies (CDCs). This means we can expedite the process if the purchase of the property is time sensitive.