Lender Benefits

Don’t turn customers away!

When a small business customer contacts you looking for a loan to purchase real estate, machinery or equipment but the company does not have the usual 20-30% equity for the project, don’t turn your customer away!

You can still do the deal with the help of an SBA 504 loan. Projects can be funded with as little as 10%* equity injection from the borrower. The SBA 504 Loan Program offers affordable financing for the borrower and significant benefits for the lender. Plus, most of your small business clients qualify.

Mitigation of Credit Risk: Lenders have first lien position and typically a 50% loan-to-value ratio, minimizing collateral risk. The SBA can realize on its collateral only if the lender is paid in full.

Management of Overall Lending Limits and Industry Exposure: With 504, smaller banks can entertain larger projects. Even larger banks can limit their exposure to certain industries and/or to a particular borrower. The reduction of CRE loan concentration on your balance sheet reduces regulatory concerns.

Can Assist More Customers: Leverages lending capacity across more borrowers and diversifies default risk and reduces loss in the event of default.

Gain New Customers: SBA 504 loans are designed to finance growth companies, and an entrepreneur who is investing in a permanent facility is often entering into his largest business-related loan. An SBA 504 loan often becomes the basis of an entire banking relationship.

Secondary Market: There is a secondary market for 504 first mortgage loans, so banks can reduce their exposure to zero and enhance their non-interest income while retaining the customer’s primary banking relationship.

Strengthening of Core Earnings: Pricing of the bank’s loan is at its discretion. 90% financing also means that more of the customer’s funds remain on deposit. The bank is able to earn fees and interest on the interim loan, and generate fee income from sale premiums and loan fees if it chooses to sell the first mortgage loan in the secondary market.

CRA Credit: Banks that participate in SBA 504 loans are eligible for Community Reinvestment Act (CRA) credit on certain projects.

Business Owner/Borrower Benefits

The SBA 504 Loan Program, offered by the Small Business Assistance Corporation, is an ideal way to save working capital when making a fixed-asset acquisition. With an SBA 504 loan you can finance up to 90% of the projects total cost and lock into a low 20-year fixed rate*.

sba504Low Down Payment. With financing available for up to 90% of the project cost, SBA 504 loans offer an affordable down payment, enabling the entrepreneur to conserve working capital and retain liquidity to meet operating needs.

Long Term Fixed Rate on the SBA 504 portion. The borrower doesn’t have to worry about the rate increasing.

Predictable Monthly Payments: SBA 504 financing allows small business owners to fix their business occupancy costs with an attractive, 20-year, fixed interest rate*.

*subject to eligibility.  Information partially provided by the National Association of Development Companies.
Information contained on this site is subject to change without notice.