When you are a woman-owned business, obtaining the financing you need to thrive can be a challenge. The Small Business Administration (SBA) offers a range of options, including the SBA 504 loan. The SBA 504 loan program can be used to purchase fixed assets and it can be especially beneficial for businesses that are seeking long-term, fixed-rate financing. However, many business owners may not be entirely familiar with the program, which is why we’re here to provide an overview of the SBA 504 loan program and touch on some of its benefits and requirements.
What is the SBA 504 Loan?
The SBA 504 loan is a government-backed loan program that is designed to help small-business owners acquire “fixed assets.” These are long-term assets that a business requires in order to operate and generate income. Examples of fixed assets include commercial real estate, major equipment, land, tools, furniture etc. The SBA 504 loan can be between $125,000 and $5 million, depending on the applicant.
Benefits of the SBA 504 Loan for Women-Owned Businesses
Unfortunately, women-owned businesses are still less likely to be approved than men-owned businesses in the US. Despite making up nearly 49 percent of all businesses in 2019, one study found that women applicants were 18 percent less likely to secure a loan. The reasons for this are varied; but In many cases, women entrepreneurs are held to more stringent standards in order to qualify for a loan. For example, female business owners may need better credit, more capital, and a higher down payment.
Fortunately, the SBA offers additional resources to help women-owned businesses succeed, including the 504 financing option. The primary benefits of the SBA 504 loan for women-owned businesses are a minimal down payment, low fees, fast origination, and a long repayment term (up to 25 years, depending on the loan). This can be especially beneficial for businesses that are fairly new (less than five years old), since they may not have a large amount of cash for upfront investments. That being said, the 504 loans are also a great option for established women-owned businesses that need to expand, renovate, or update equipment.
Another benefit of the SBA 504 loan is that the rate is fixed. This means the monthly payment, including interest, will remain the same over the course of the loan. This allows new and established businesses to budget without worrying about unexpected changes to their payment.
Requirements of the SBA 504 Loan Program
The SBA 504 loan program also has certain requirements that businesses must meet in order to be eligible. Current qualifications for the SBA 504:
- You must be a for-profit business operating in the United States
- You must have a net worth of less than $15 million
- Your net profits for the last two years cannot exceed $5 million
- You must demonstrate adequate personal and business cash flow by providing three year’s worth of tax statements and financial documents
How to apply for the SBA 504 Loan
To apply for an SBA 504 loan, business owners will need to work with a Certified Development Company (CDC), which is a nonprofit organization that is certified by the SBA to provide lending services. The CDC will work with the business owner to prepare a loan application, which will include financial documents such as tax returns and a business plan.
CEDCO is a CDC that works exclusively with Colorado entrepreneurs. We are passionate about matching business owners with the best loan to achieve long-term success. We have approved over 1000 loans for many different projects. We offer 20 and 25 year fixed real estate loans, 10 year equipment loans, 25 year debt refinance options, and more. We pride ourselves on being as transparent as possible with our clients, and work with you every step of the way to make the process as stress-free as possible.
If you are a Colorado small business owner looking to finance operations, refinance from a different small business loan, pay for updates and renovations, or other project, call or go online today to see how we can help you.