How SBA 504 Loans Will Protect Against Rate Hikes

Few things in life are as exciting as starting a new business. Frequently, however, the excitement of what is happening right now at the beginning can fog the view of the future of your business. One of the shortsighted aspects that tend to creep in concerns your brick-and-mortar establishment. Do you rent? It probably sounded good, and leasing was a way that you could get your business off the ground. But, is leasing your building a good strategy for your business’ future? If you did happen to get a commercial mortgage to finance a building, how were the terms? If you are like many business owners, you may be dreading a day in the not-so-distant future when interest rates go up and increase the monthly payment on your variable rate loan. An SBA 504 loan might be your answer if you find yourself in one of these situations.

The Small Business Administration (SBA) never loans money itself. Instead, it guarantees loans to small businesses from commercial bankers and lending institutions. Since the lender has little to no risk involved, it can provide better terms to borrowers. If the company goes under or the borrower does not repay the loan, the lender gets its money refunded by the federal government. A low, fixed-rate that the business owner can reimburse in a long-term payment schedule is an ideal situation for many small companies trying to get started. An SBA 504 loan fits these criteria and is often a good way for a fledgling business to get on their feet or recover after a rough start.

With as little as 10% down and a few necessary pieces of documentation, you can usually qualify for one of these loans as long as you have decent personal credit and a solid business plan. With 25 years to repay and a fixed, low-interest rate, the SBA 504 loan can be used to set a course for the future success of your business. You can use the money for capital investments on projects including building improvements, new construction and buying buildings and land. You can also pay off less favorable loans and other debts to improve your monthly cash flow.

Getting a good start in your new business requires not only daily planning in the present but also an eye toward long-term goals and objectives. Using a smart financing vehicle like an SBA 504 loan can help you avoid rent or interest rate hikes that could make your business crash and burn before it gets off the ground.

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