Possibly the best feature of the 504 compared to the 7(a) loan is the difference with the interest rate. The 504 loan offers a below market rate, fixed for 20 years, while the 7(a) interest rate is variable and unpredictable.
An additional advantage comes with energy efficiency: Meeting the goal of reducing energy consumption by 10% or using 10% renewable energy brings the huge advantage of allowing the borrower to initiate an unlimited number of new projects.
California Hoteliers Praise the SBA 504 Loan Program
TMC client and hotelier Jay Desai used a 504 loan to acquire and renovate the historic Sonora Inn, as well as the Rodeway Inn motel across the street from it. He then went on to acquire the Sands Motel in San Pablo, also using 504 loan financing through TMC.
“The SBA 504 program makes sense for our approach,” Desai said. “SBA 7(a) financing is limited to $5 million and if you own multiple properties, that doesn’t go very far. If you use the 504 program and go green by installing solar and the like, it doesn’t count against your eligibility.”
Another TMC client, Shailendra “Sam” Devdhara, noted that it pays to look into the 504 option. He has financed motels in San Francisco, Livermore and Santa Clara with TMC. “Because the SBA 504 program is available, independent hotel owners can get into the business with a smaller outlay of capital,” he said. “That allows us to make improvements on older properties and upgrade a community’s accommodation offerings. Not only do our solar panels save energy, but they help in marketing the hotels. Guests like the idea of going green.”
Is the 504 Loan the Right Choice for You?
Qualifying for a 504 loan isn’t as exclusive as you might imagine. In fact, most businesses in the U.S. qualify for the 504 loan, as long as they meet a few simple guidelines as a privately-owned business which operates for profit.
Regardless of where you are in the process—whether you have a building picked out or are just hearing about this option for the first time—TMC Financing can help guide you through the next steps, from the prequalification process through the duration of your ten or twenty year loan.
If you are thinking about buying or building a hotel or motel in California or Nevada, you may want to talk to one of our local 504 loan experts. We can prequalify you for a 504 loan and provide consultation to help you get the best outcome for your project.
Barbara Morrison, a local small business advocate and civic leader, founded her first company TMC Financing in 1981. TMC is a Certified Development Company that provides commercial real estate financing to small business owners via the SBA 504 Loan Program. TMC consistently ranks among the top certified development companies nationwide, and has funded projects worth more than $9 billion across California and Nevada. Nearly 5,000 small businesses have benefitted from this financing, resulting in the creation of an estimated 50,000 jobs. TMC is also the No.1 SBA 504 hotel lender in the United States. Barbara is also the founder of Working Solutions, a Bay Area microlender whose mission is to provide micro entrepreneurs, particularly low-income individuals, women and minorities, with the access to capital and resources they need to start a successful business.
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