Top 10 List of Reasons to Use a 504 Loan

At the end of October, we shared an interview with Connie Morrison, which was the first part of our two-part series featuring Centralina Development Corporation, Inc. Today we’re sharing the second and final part*, which is Connie’s list of the Top 10 List of Reasons to Use a 504 Loan. Enjoy!

*This information was provided by NADCO, which stands for the National Association of Development Company. They provided Centralina with this information for the 504 loan program to better educate banks and potential borrowers. 

 

Top 10 List of Reasons to Use a 504 Loan

 

1. OWN YOUR BUSINESS, OWN YOUR LIFE
If an entrepreneur is paying down a REAL loan rather than throwing that same money away on rent, it means investing in his or her personal and business’s financial future. Once the building or machinery is paid off, a business can enjoy the same revenue without paying a monthly property expense. In fact, they may even rent the space out to other businesses for a profit.

2. VALUE
With a REAL loan, an entrepreneur can purchase his or her business’s real estate or machinery. He or she then gets the tax benefits and appreciation on the real estate while locking in occupancy costs for 20 years.

Bojangles is an example of a business recently funded by Centralina.
Bojangles is an example of a business recently funded by Centralina.

3. LOW DOWN PAYMENT
As an entrepreneur, you know the importance of liquidity. With financing available for up to 90 percent of project cost, the REAL loan offers a 10 percent down payment (compared to 25 or 30 percent through a traditional bank), enabling the entrepreneur to conserve working capital.

4. GOVERNMENT BACKED
The SBA (Small Business Administration) created this program to increase the accessibility of business property loans to entrepreneurs, helping enhance the economic health of local communities.

5. LOW FEES
NADCO encourages interested small businesses to compare REAL loan fees to fees of other loan options on the market, including other SBA-backed loans such as the popular 7(a). What they find is that 504-loan fees are the lowest on the market!

6. LONG TERM FINANCING
The REAL loan means 20-year, fully amortized financing. This enables a small business owner to pay for a facility over the long term while avoiding risky loan call provisions typical of traditional lenders.

7. COMPETITIVE INTEREST RATES
The 504-loan boasts low interest rates that vary based on market forces. The actual interest rate the borrower pays is calculated based on the debenture rate for the month the loan is funded. REAL loans are funded by monthly bond (debenture) sales to investors on Wall Street.

8. FIXED RATE
REAL loan financing allows an entrepreneur to fix his or her business occupancy costs rather than worry about market instability or fluctuating rates.

Jeffrey's is an example of a business recently funded by Centralina.
Jeffrey’s is an example of a business recently funded by Centralina.

9. FLEXIBILITY
An entrepreneur can purchase and hold the title to a building personally, in the name of the business, or even set up a holding company for the real estate. This gives the small business owner the flexibility to maximize tax benefits of ownership, while also minimizing liability in the manner best suited for the entrepreneur and his company. In some circumstances, two or more small businesses will receive a single REAL loan if it suits them to combine, creating a real estate holding company. This option works especially well for professionals in the medical, veterinary, legal and accounting fields.

10. ELIGIBILITY
Unbelievably, given the advantages, most businesses worth under $15 million are eligible for a REAL loan for their property and machinery needs. This includes projects as costly as $5,500,000 of REAL financing depending on the nature of said project.

I think one of the most distinctive things about Centralina is our experience- either as a previous business owner, business lender and SBA experience is an advantage to the borrower. We can advise a project from all sides and work with the banks and SBA for a smooth process for our borrowers.

 

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Thank you, Connie, for sharing so much important information with our readers! To learn more about Centralina, be sure to visit their website.

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