Introducing the New 25-Year 504 Loan Term: What It Means for Borrowers

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504 fixed rate protects against rate hikesSince the beginning of the year, interest rates are on the rise and this trend will likely continue in 2019. It is more important than ever to lock in a below market, fixed rate.

Although rising rates are a sign of a healthy economy and can bring opportunities such as pay raises and a better return on your savings, it can also be worrisome to business owners for a few reasons.

First off, rising rates will undoubtedly impact real estate rental rates. Small business owners who are currently leasing property will be in jeopardy of rent spikes and potentially getting priced out of their neighborhood. This is a very compelling case to become an owner instead of a renter before it’s too late.

According to one of TMC’s borrowers, Patrick Feely, “we hear lots of stories of businesses that are doing quite well and their lease rate doubles or even triples in a couple of years. To own your own building, is fundamental to allowing one to think long-term.”

Substituting a rent payment subject to continual increases with a stabilized mortgage payment will provide peace of mind and will allow you to focus on growing your business. It allows you to benefit from your monthly rent check – not your landlord.

Now that we’ve established why small business owners should buy their building it’s important to discuss how a small business owner should buy their building. Most loans available to small business owners have variable interest rates, which is the other factor that can cause a business owner to worry when it comes to rising interest rates. Rising rates means increased monthly payments and an unpredictable future. By securing a loan with a fixed, long term rate, you stabilize your occupancy costs for the life of the loan and always know what your monthly payment will be.

The SBA 504 loan features a below market rate that is FIXED for 25 years. It is fully amortized so there is no looming balloon payment at the end of the term. “This long term, fixed rate keeps your monthly occupancy costs stable and allows you to focus on your business,” explains Barbara Morrison, CEO and Founder of TMC Financing. “Locking in a low, fixed interest rate with a long term is key.”

In addition to a favorable interest rate, the 504 loan features a low down payment. Small business owners can purchase property or equipment with as little as 10 percent down, preserving capital to use towards their business.

The 504 Loan is versatile and can be used to:

  • purchase land or buildings
  • construct buildings
  • purchase equipment with a service life of ten years or more
  • improve, upgrade or renovate buildings
  • refinance conventional debt

Small business owners must make crucial decisions daily. Who to target, what product to launch, who to hire, how to best market your services, etc. One of the biggest decisions many small businesses owners face is whether to rent or own fixed assets, such as a building or machinery the business needs. With the SBA 504 loan, ownership is affordable and within reach. This should be an easy decision for business owners. Stabilize your occupancy costs, build equity, and give yourself some peace of mind by purchasing a building for your operations.

With the feds confirming there will likely be another hike in December – plus more expected increases in 2019, time is of the essence to secure your fixed, below market rate with an SBA 504 Loan.

To get prequalified for a 504 loan and to realize your purchasing power,  you only need three documents – three years of your personal and business tax returns, a personal financial statement and interim financials. Certified Development Companies (CDCs) like TMC Financing can help you with this and get you prequalified within 48 hours.

If you have other questions about obtaining a 504 loan, one of TMC Financing’s 504 loan experts would be happy to speak with you. TMC is an SBA Premier Certified Lender and a high-volume loan provider. With over 35 years of experience, TMC can help you find the financing that is best for you and guide you through the 504 loan process. Contact TMC Financing today.