If you are considering an SBA 504 small business loan, congratulations. You are about to embark on an endeavor that can make your dreams come true and secure your financial future.

Of course, if you get approved for the SBA 504 loan, you will need to have enough funds available for a down payment.

What is an SBA 504 loan down payment?

Pretty much the same as any other down payment—an amount of money paid by the borrower to the lender at the start of the loan term—usually a percentage of the total project costs.

In the case of the SBA 504 loan, the lending partner (typically banks) require the down payment as a promise that the borrower will pay back the loan. Having the funds available for the down payment shows them that you will likely be reliable when it comes to regular loan payments.

SBA 504 down payment benefits

Luckily, the SBA 504 loan offers an array of benefits, including requiring a down payment much lower than traditional loans.

For existing businesses going into a multi-purpose building, 10% down is all that is needed to get started with a 504 small business loan. This can help you protect working capital, especially crucial during a crisis when many haven’t been able to operate at normal capacity and have decreased revenue.

Traditional loans require a 20–30% down payment.

But, even though the down payment percentage is attractive, what if you don’t have the 10% available to invest?

If you don’t have enough in the bank for your SBA 504 small business loan down payment, you have options:

• Borrow the Cash: You are allowed to borrow money for an SBA 504 loan, but there are some stipulations. According to the SBA, “If the small business applicant can demonstrate repayment of this loan from sources other than the cash flow of the business, the cash injection may be considered equity.”

Other considerations that might qualify are another business that you own, a home equity loan, or a conventional loan repaid by money from a spouse’s job. The goal here is to prove that you will be able to repay the down payment loan and still afford the SBA 504 loan.

• Find an Investor: You may know of a friend or business partner looking for lucrative businesses to invest in. If you find someone you trust who is willing to take a risk, this could be an option to fund the down payment in exchange for a portion of the profits.

Don’t forget the money you spend on items you already purchased for your start-up can count towards your down payment. Make sure you keep all of your receipts or proof of purchase.

The SBA 504 loan is one of the best available options for small business owners. To learn more about your down payment options, call 504 Capital at 757-623-2691.