4 Key Features of SBA 504 Loans
1. Fixed Interest Rates
SBA 504 loans come with fixed interest rates, which means that your monthly payments on the SBA 504 Debenture will remain fixed throughout the life of the loan. This makes it easier to budget and plan for your monthly expenses. Unlike traditional loans, which often come with variable interest rates that can fluctuate over time, SBA 504 loans offer a stable and predictable financing option for small business owners.
2. Low Down Payment Requirement
One of the most attractive features of SBA 504 loans is the low down payment. The typical down payment ranges from 10% to 20% depending on the borrower’s experience in the industry, is the loan for existing property or new construction, and the financials as described in their Personal Financial statements. SBA 504 provides financing with cash but only if your collateral qualifies. Your 504 lender can determine if your collateral qualifies for the cash out loan.
3. Long Repayment Terms
SBA 504 loans also offer longer repayment terms compared to traditional loans. You can spread out your payments over 25 years making it easier to manage your cash flow. This can be an ideal loan option for a car wash owner looking to upgrade multiple machines at multiple locations or purchasing an existing Hotel, Car wash, Warehouse, etc. . SBA 504 loans offer repayment terms of up to 25 years
4. Lower Debt Service Coverage Ratio (DSCR)
The Debt Service Coverage Ratio, commonly known as DSCR, is a financial metric that lenders use to determine your ability to repay your loan. The DSCR measures your ability to cover your loan payment.
SBA loans offer several key features that make them an attractive financing option for small business owners. The low down payment requirement, longer repayment terms, fixed interest rates on the 540 Debenture, lower DSCR, and multiple loan programs make SBA loans an affordable and flexible financing option for businesses looking to grow and expand. If you are a small business owner looking for financing, consider exploring SBA loans as a viable option for your business.
