{"id":9336,"date":"2018-08-23T15:00:29","date_gmt":"2018-08-23T22:00:29","guid":{"rendered":"https:\/\/www.tmcfinancing.com\/?p=9336"},"modified":"2021-05-10T20:30:20","modified_gmt":"2021-05-11T03:30:20","slug":"introducing-the-new-25-year-504-loan-term","status":"publish","type":"post","link":"https:\/\/www.tmcfinancing.com\/es\/introducing-the-new-25-year-504-loan-term\/","title":{"rendered":"Presentamos el nuevo plazo de pr\u00e9stamo 504 de 25 a\u00f1os: lo que significa para los prestatarios"},"content":{"rendered":"

\"\"<\/p>\n

You may have noticed that the Small Business Administration (SBA) 504 loan now has a 25-year option.\u00a0<\/span><\/p>\n

This new loan product joins the 10- and 20-year term loans that have been around for over 30 years. Everything else about the 25-year loan will be familiar to you: it still offers low down payment, below-market rate, full amortization.<\/span><\/p>\n

Why a 25-Year 504 Loan Is Good News for Businesses<\/b><\/p>\n

The commercial lending market has changed a lot since the 10- and 20-year 504 loans were first introduced. For example, longer terms have become much more common. A 25-year commercial loan was a rarity at one time, but no longer. So the SBA is catching up with the times. The new 504 loan option means that your 504 loan is more likely to match the term of the partner bank or credit union. \u00a0<\/span><\/p>\n

The biggest advantage for borrowers is that a longer term means lower monthly payments, giving you more money to work with in your daily operations. As <\/span>SBA head Linda McMahon put it<\/span><\/a> when announcing the new product, <\/span>\u201cThis increased flexibility in their loan terms will put [business owners] in a better position to manage their capital and face challenges like rising operating expenses.\u201d <\/span>Lower payments also mean that the loan is more affordable, and so more businesses can qualify for it.<\/span><\/p>\n

A 504 loan is made up of three parts. A conventional lender provides 50% of the total project cost and receives first lien position. A <\/span>Certified Development Company<\/span><\/a> like TMC Financing provides up to 40% of the total cost, up to $5 million ($5.5 million for qualified manufacturing projects or those eligible for the Green Energy Program). You, the borrower, provide 10-15% as a down payment.<\/span><\/p>\n

Let\u2019s use <\/span>TMC\u2019s SBA 504 Loan Calculator<\/span><\/a> to look at the difference a longer loan term can make on loan payments. We\u2019ll assume a 504 loan that looks like this:<\/span><\/p>\n

 <\/p>\n

 <\/p>\n\n\n\n\n\n\n\n\n\n
Total loan amount<\/span><\/td>\n$2,000,000<\/span><\/td>\n<\/tr>\n
Conventional loan amount<\/span><\/td>\n$1,000,000<\/span><\/td>\n<\/tr>\n
Conventional loan term<\/span><\/td>\n25 years<\/span><\/td>\n<\/tr>\n
Conventional loan rate<\/span><\/td>\n6%<\/span><\/td>\n<\/tr>\n
Down payment<\/span><\/td>\n$200,000<\/span><\/td>\n<\/tr>\n
SBA loan amount<\/span><\/td>\n$800,000<\/span><\/td>\n<\/tr>\n
Estimated SBA fees (included in loan)<\/span><\/td>\n$20,000<\/span><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

 <\/p>\n

We\u2019ll look at two SBA loan terms\u201420 years and 25 years. Interest rates generally increase slightly with longer terms, as you are paying to use someone else\u2019s money, and it costs more to keep it longer. Even so, a five-year difference will make a big difference on your cash flow, as can be seen below:<\/span><\/p>\n\n\n\n\n\n\n\n
<\/td>\n\n

20-Year SBA 504 Loan<\/b><\/p>\n<\/td>\n

\n

25-Year SBA 504 Loan<\/b><\/p>\n<\/td>\n<\/tr>\n

SBA interest rate<\/strong><\/td>\n\n

5.31%<\/span><\/p>\n<\/td>\n

\n

5.48%<\/span><\/p>\n<\/td>\n<\/tr>\n

Total monthly payment<\/strong><\/td>\n\n

$11,997
\n<\/span><\/p>\n<\/td>\n

\n

$11,469
\n<\/span>(for the first 20 years, then decreasing to $6,444 for the final five years)<\/span><\/p>\n<\/td>\n<\/tr>\n

Monthly difference<\/strong><\/td>\n<\/td>\n\n

\u2013$528
\n<\/span>(for the first 20 years)<\/span><\/p>\n<\/td>\n<\/tr>\n

Annual difference<\/strong><\/td>\n<\/td>\n\n

\u2013$6,336
\n<\/span>(for the first 20 years)<\/span><\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

An additional $528 in your budget every month for 20 years can make a <\/span>big<\/span><\/i> difference for your business. Having that extra money available at the beginning of the loan will make your business more stable and give you the opportunity to meet long-term expansion goals more quickly. <\/span><\/p>\n

Other Benefits of the 504 Loan<\/b><\/p>\n

The 504 loan is designed<\/span><\/a> to be flexible and to meet the needs of most small businesses. It is fixed-asset financing. This includes: <\/span><\/p>\n