As a small business owner, you face many difficult decisions about how to use your funds. A significant consideration is whether you will lease or purchase property and large equipment. Discover how 504 loans from the Small Business Administration open the door to the advantages of property ownership.
Why Ownership Is Preferable To Leasing
Fluctuating interest rates can create difficulties for your company. For example, if you lease property for your business, you could experience continual rent spikes that push you out of a profitable location.
Likewise, leasing large equipment comes at a high-interest rate and denies you the privileges of ownership. Plus, owning your equipment permits you to take advantage of tax benefits.
Purchasing real estate and other property for your company gives you stability and can add value to the business through asset acquisition. While leasing can be the right option for new companies or those in transition, ownership sets you up for long-term growth.
Why SBA 504 Loans Are Often Better Than Conventional Loans
The challenge with getting a loan is that most institutions only offer you financing with a variable rate. When the Federal Reserve raises the rates, your monthly payments will likely jump as well. This variability presents additional challenges for budgeting and keeping a healthy cash flow.
SBA 504 loans provide a workable solution for small businesses. You can get a fully amortized loan with a below-market rate. Your costs remain stable as you count on the same payment for up to 25 years.
This financing is not just for real estate purchases, either. You can also:
- Purchase expensive equipment with at least a 10-year lifespan
- Refinance conventional loans
- Construct buildings
- Renovate, upgrade, or improve your property
Additionally, 504 loans require a lower down payment than other loans. With as little as 10% down, you can secure lending.
How To Quality for a 504 Loan
The 504 loan process is straightforward when you work with a qualified lender or a Certified Development Company. You may even be able to complete the process within a couple of days.
Start by verifying your eligibility for the program by checking the SBA’s requirements. The lender might also have a few additional requirements regarding your credit.
Prequalify by presenting three years of personal and business tax returns, your company’s interim financials, and a personal financial statement. After prequalification, you’ll understand your purchasing power and can make definite plans on your purchase or refinancing.
With a 504 loan, you can seize the benefits of ownership. Talk with a qualified financial professional to determine your options today.
