Normally, when we think about SBA loans, the fist thing which comes to our mind is SBA 7A loan program. Actually, there has more than one type of SBA supported loan program is available on the market. If you want to buy real-estate property for business or equipment, then surely you will want to engage yourself with the very affordable SBA 504 loan.
A big number of people in this era are using SBA 504 loan for their business purpose. More than 51% real-estate people in the USA are using SBA loan. Also, you should note that some business types are ineligible for this loan such as nonprofit organizations, lending businesses, religious organizations.
The SBA 504 loan program is a cheap loan program. The interest rates are also really low and bellow the normal market rates for small trades. They can be fixed or variable, and get pegged an increment above market rates for U.S. The terms of SBA 504 are good, with 10 to 20 years loans. Basically, the loan is covered by two parts one is from SBA which is 40% of the total loan amount and the other is a bank which is 50% of the total amount. The left 10% down payment need to be submitted by the debtor.
For the bank part, the bank receives the first lien on the collateral. It means that in the event of a default, the bank has the first power to the collateral. So, in the default case, the bank would still break even on the loan as long as the asset value does not become low by more than 50%. It is really a low-risk deal for the bank so bank love to do this type of deals.
Another best option that comes with SBA 504 is the low down payment. In maximum cases, it is just 10% of the appraisal value. If you have a start-up business or any special business such as a medical shop or gas station then the down payment will grow by 5%.