How do I get an SBA 504 Loan for my Small Business?

how can i get an sba loan?

If you’re a small business owner on the hunt for financing, chances are you have heard about SBA loans. SBA Loans are great for small to medium sized businesses that want to expand but also need to conserve capital. The SBA 504 loan in particular is a loan that allows business owners to purchase, renovate, construct or refinance commercial real estate with a low down payment and a 25-year, below-market fixed interest rate. They allow business owners to stabilize their occupancy costs for the long term, while conserving capital for their business. SBA 504 loans cover equipment, furnishings, closing costs and soft costs too.

If you’re a small business owner and this sounds appealing to you, the next question we hear is, how do I get an SBA 504 Loan?

The interesting thing (and also the HELPFUL thing) is that you cannot just go and apply for a 504 loan on your own. SBA 504 loans are administered by certified development companies, such as TMC Financing. Certified development companies are nonprofit organizations regulated by the SBA created to help small businesses through the entire loan process, from application to closing to servicing. There are about 200 active CDCs in the U.S. and they all offer the same loan product with the same fees.

So if you are interested in an SBA 504 Loan, the first step is to connect with a CDC in your local area. Since all CDCs offer the same loan product, it is important to research what sets the CDC apart from other CDCs. The number of years of experience, annual number of loans approved, and client testimonials are all factors that can help you choose the best CDC.  Establishing a relationship with the right CDC is essential as they will be your advocate through the life of the loan.

Once you’ve identified a certified development company, then next step is to get prequalified. Your CDC can prequalify you at no cost with three documents:

  1. Three years of personal and business tax returns
  2. A personal financial statement
  3. Interim financials

Getting prequalified for a 504 loan can be extremely helpful! It will show you your purchasing power and what monthly payments to expect. It can put you ahead of other offers when making a bid on a building. It gets you organized and will speed up the process immensely if/when you decide to proceed with the loan application.

Another great aspect of the 504 loan is that most for-profit, privately-owned businesses qualify. Program eligibility is based on the net worth of the business and net profit after tax on average for the last two years. Business must occupy at least 51 percent of the building and 60 percent of the building with new construction.

If you are a small business owner in California or Nevada and you’d like to learn more about the SBA 504 Program, please reach out to a TMC Financing loan expert. If you are located outside of California or Nevada and need help finding a local certified development company, we are also happy to help.

TMC Financing is the No. 1 CDC in the nation. In nearly 40 years, TMC has helped over 5,000 businesses secure financing for projects worth over $12 billion.