There are many factors impacting SBA lending right now and SBA’s role has grown even more important in the past 18 months, having been charged with distributing various recovery resources aimed at helping small businesses strengthen, recover, hire, and grow.  This includes the Paycheck Protection Program (PPP), Economic Injury Disaster Loans (EIDL), Debt Relief Programs, Shuttered Venue Grants, and the Restaurant Revitalization Fund.  In addition, small business guidance and other resources are always available from SBA’s resource partners, such as Small Business Development Centers (SBDCs), Women’s Business Centers, and SCORE.

More and more small business owners are turning to SBA loans as quality sources of capital.  That’s why its important to be aware of the current factors impacting SBA lending and why volume isn’t expected to slow any time soon.  

Five Factors Impacting SBA Lending:

  1. SBA lending is up – and so is awareness
  2. Interest rates are at historic lows
  3. Fees are 20 bps lower for fiscal year 2022
  4. Refinancing is available to more small businesses
  5. More business owners are buying or constructing facilities


1 – SBA 504 Lending is Up…and So is Awareness

Access to capital is consistently one of the top challenges entrepreneurs and small businesses encounter, making the SBA 504 Loan Program a vital resource to economic growth and job creation.  We’re happy to report SBA 504 lending was up 41% in Fiscal Year 2021…proof that quality capital is getting into the hands of entrepreneurs and small businesses are utilizing this smart financing source to grow and strengthen their businesses.  This unprecedented volume is not expected to slow down either. 

In fiscal year 2021, the SBA 504 program delivered 9,600 loans worth more than $8.2 billion to small businesses, fully exhausting funding authority for the first time in the program’s history.  “The SBA continues to make headway in helping small businesses access much-needed capital, but much more work remains to be done,” said Patrick Kelley, Associate Administrator for the Office of Capital Access. “Our flexible, low-interest 504 loan program grew in loan volume by 41%, and the SBA team is already at work for fiscal year 2022 to support job and entrepreneurial growth across the country.”


SBA 504 lending was up 41% in Fiscal Year 2021…proof that quality capital is getting into the hands of entrepreneurs.  This unprecedented volume is not expected to slow down either.

During the pandemic, the Small Business Administration (SBA) received widespread media attention for its COVID-19 relief programs, such as the Paycheck Protection Program (PPP).  “In the midst of a once-in-a-generation pandemic, the SBA’s mission-driven team delivered a record number of SBA’s traditional loans to our nation’s small businesses – in addition to more than $1.1 trillion in COVID-related relief since the start of the pandemic,” said SBA Administrator Guzman. “While progress has been made, our data also tells a deeper story:  historic inequities in accessing capital persist, and we must do more to lower the barriers of entry to opportunity for all our entrepreneurs. We will continue to build on our impactful programs to meet small businesses where they are and connect them with the resources needed to thrive.”

For years, the department has struggled to get the word out about its services. And there’s no question that the SBA has many services to offer small businesses well and beyond dolling out loans and grants.  “The SBA has always been the best kept secret in government, and we don’t want to be that. We want to be known.  We know that government can be hard to navigate, and we’re trying to simplify our processes,” Guzman says. “Our customers are small businesses owners who have to wear so many hats and have so many responsibilities and need a team behind them.”

The SBA has an opportunity to leverage the enormous PR it received during the pandemic and use it to make more businesses aware of all that it does. So how does administrator Guzman plan to do this?  “We’re going to be looking at all of our programs completely and trying to apply a customer-first and technology forward approach as well as an equitable approach,” she says. “We intend to make sure that we’re meeting businesses where they’re at in their current situations and providing products and services that can best help them grow.”

So what’s ahead for fiscal year 2022?  SBA is increasing its efforts at addressing the systemic gap in access to capital for the smallest and underserved businesses.  This has been Administrator Guzman’s north star and will continue to be a top SBA priority in FY 22 and beyond.  SBA will also prioritize creating more opportunities for small manufacturers and their employees in cities and towns all across our country.  

Through the SBA’s FY 2022 Annual Performance Plan and Budget, the Agency reaffirms its commitment to helping small businesses recover, provide jobs within their communities, and ensure America remains competitive in an interdependent and highly competitive global economy.  “America’s entrepreneurs are innovators who take risks on ideas, invest in their communities, and create jobs. Their skills and creativity support their families, make our neighborhoods vibrant places to live and work, and fuel the nation’s economic strength.”


What are SBA 504 Loans?

SBA 504 loans, guaranteed by the U.S. Small Business Administration, provide long-term financing for the purchase of real estate, equipment, and other fixed assets. There are three parties to an SBA 504 loan—the borrower, the bank, and the SBA-approved certified development company (CDC) (Growth Corp). SBA 504 loans feature 10- to 25-year terms, low interest rates, and down payments as low as 10%.

Sometimes it takes a big investment of resources to jump start growth for a small business. Maybe there’s special equipment that could increase productivity.  Or, a building next door that would make a perfect addition to an existing shop. Or, maybe an existing facility needs a serious face-lift.  In each of these cases, an SBA 504 loan could be the perfect business financing solution.  These loans are available to for-profit businesses to purchase real estate, equipment, and machinery. They can also be used to refinance existing commercial mortgage debt or to remodel existing facilities. SBA 504 loans are very business-friendly, requiring a down payment of typically just 10% and offering 10- to 25-year terms with low, fixed interest rates.


2 – Interest Rates are at Historic Lows

Throughout the 2021 debenture pricing, we’ve seen continued low, fixed rates for SBA 504 loans…averaging under 3%.  One of the biggest benefits of an SBA 504 loan are the low interest rates and long terms. Since the loan is government-backed, the rates and fees on an SBA 504 loan are a lot lower than what you’re likely to find with a conventional loan.  SBA 504 loan interest rates are composed of two different interest rates—the rate on the CDC portion of the loan and the rate on the bank portion of the loan. The SBA sets standard, fixed rates for the CDC portion of the loan and a list of fees associated with 504 loans, along with when they are due, can be found here.

Check out the current and historical interest rates for 504 loans

SBA 504 loans have long repayment terms, which is part of what makes them so beneficial for small business owners.  In fact, one of the reasons SBA 504 lending is up in FY 2021 is the addition of a 25-year fixed rate loan term. A long repayment term translates to lower monthly payments for your business, which helps you conserve cash flow.  SBA 504 loan terms depend on what you’re using the loan for. The term is typically 10 years if you’re purchasing machinery or equipment, and 20 or 25 years if you’re refinancing or constructing/purchasing/remodeling land or buildings.


3 – Lower Fees for FY22

Good news!  On September 7, 2021, SBA announced lower fees for 504 Loans approved October 1, 2021 through September 30, 2022.  The fee changes are as follows:

  • The annual service decreased from 0.4517% in FY21 to 0.2475% in FY22
  • For 504 refinance loans, the annual service fee decreased from 0.4865% in FY21 to 0.2591% in FY22

The reduction in fees equates to about a 20 basis point lower interest rate.  The lower fees are a welcome reduction in the already low interest rates.  Check out the interest rate history.  Or, check out what an estimated payment might look like for your business.


4 – Refinancing is Available to More Small Businesses

SBA 504 Debt Refinancing is government-backed financing that comes with three huge advantages.

  • One, it offers business owners a below-market, fixed rate and a repayment period of up to 25-years.
  • Two, the down payment requirements are as low as ten percent and are often fulfilled by existing equity in the project.
  • And three, borrowers can elect to get cash out for business expenses. Cash can be taken out for salaries, rent, repairs, maintenance, inventory, utilities, credit cards, lines of credit, etc.

On July 29, 2021, SBA enhanced and expanded opportunities to refinance qualified debt.  This allows more small businesses to be eligible for SBA 504 refinancing.  The changes are as follows:


For 504 debt refinancing with expansion –

    • The amount of the existing indebtedness that may be refinanced as part of a 504 Project is increased from not more than 50% to not more than 100% of the project costs of the expansion.

 For 504 debt refinancing without expansion –

    • Reinstates an alternate job retention standard – all existing jobs measured on a full time equivalent (FTE) basis can be counted as jobs retained by the refinancing project.
    • Qualified Debt must be at least 6 months old before the SBA application date to be eligible for refinance, reduced from 2 years old.
        • Additionally, SBA is removing language allowing a loan to be eligible for 504 debt refinance if that original loan had been refinanced within 2 years of application date, as SBA believes this is no longer necessary given the reduction in the debt seasoning requirement to 6 months.
    • Allows the refinance of existing government guaranteed debt – existing SBA policies related to refinancing existing 504 or 7(a) loans will apply (these are the same requirements that currently exist for the 504 debt refinance with expansion program), including –
    • Eliminates the requirement that the borrower must be current on all payments due for not less than 1 year before the SBA application date.  Please note:  in accordance with prudent lending standards, SBA still expects the CDC to consider whether the applicant is current on all payments due and the applicant’s history of delinquency in its credit analysis.


5 – More Business Owners are Buying or Constructing Facilities

We’re seeing more and more businesses opt out of being at the mercy of landlords.  The SBA 504 Loan provides a government-backed financing option for buying or constructing a building…and often saves business owners money in the process:

There are many reasons business owners should consider buying or constructing a building for their business, but here are the top four:

  • Equity: with every monthly payment, equity is being built…rather than putting money in a landlord’s pocket
  • Tax Benefits: There are tax benefits to owning in every state.  Please consult with a tax professional for more specific tax benefits.
  • Stability: The peace of mind that comes from predictable payments…fixed terms = fixed occupancy costs
  • Preserves Cash:  in many cases, the monthly payment to own the business’s building is less than renting.


The SBA 504 Program was designed to make building ownership possible for small business owners by pairing it with the best terms on the market. It is the most affordable way to purchase a building – and now, with record low interest rates, you will not find a more optimal time to take advantage of the program.  


Let’s take a look at how the Small Business Administration’s (SBA) 504 loan can help with buying or building a facility:

  • Low down payment requirements:  for businesses looking to protect their cash flow, or facing tighter cash flow because of higher interest rates, the SBA 504 offers an advantage.  Down payments as low as ten percent.  This amounts to huge cash savings as most conventional loans require 20%, or even up to 35%, down.
  • Low, fixed interest rates and long loan terms:  conventional loan rates are typically only fixed for a certain period of time, usually 3-10 years.  After that, the rate is reset and could become variable.  In a rising rate environment, that means you could find yourself with a much higher rate in the future.  Conversely,  a long-term fixed-rate mortgage, such as the SBA 504, locks in today’s low interest rates and eliminates concern over future interest rate hikes.  The interest rate for SBA 504 loans is well below prime and has been a record lows this year.  By locking in this low rate, which is fully amortized over 10-, 20-, or 25-years, you’ll see predictable and lower monthly payments.
  • No balloon payments or call provisions:  a balloon loan mortgage, common in commercial real estate, is usually a short mortgage that requires a large one-time payment at the end of the term.  This can mean your payments are lower in the years before the balloon payment comes due, but you will either owe a lump sum at the end or be required to refinance the balance.  This can lead to another round of building appraisals and credit approvals to endure.  However, unlike conventional commercial real estate loans, a 504 Loan has no balloon payments.  Call provisions are similar to balloon payments in that, with a conventional loan, you may be required to maintain a specific debt-service coverage ratio as a way for lenders to lower their risk.  If you fail to meet that provision, the bank can “call in” your loan.  This means you would either have to pay off the balance, or refinance it.  The SBA 504 Loan Program has no covenants or call provisions either.  Small business borrowers receive a long-term, fixed rate loan offering secure, predictable monthly payments for the life of the loan.
  • SBA 504 Loans finance total project costs:  let’s face it, the true bottom line of an expansion project, no matter the size, is often far more than the just the cost for brick and mortar or equipment.  Soft costs and closing costs can add up.  Most conventional bank loans do not include soft costs in the financing, leaving borrowers to pay for them out of their own pocket.  However, the SBA 504 Loan Program finances total project costs.  Total project costs include not just the cost for land and building, hard construction, or equipment, but also the soft costs like moving your equipment, furniture, fixtures, closing costs and professional fees.
  • Businesses are incentivized to go green:  the SBA 504 Green Loan program is a financing option that presents an incentive for small businesses to increase their building’s sustainability through energy efficiency and/or renewable energy solutions. The program offers up to $5 million in financing per project and can receive a maximum of $16.5 million in aggregate funding. The funding can be increased to $5.5 million if public policy goals are met and can be used for multiple SBA 2nd mortgages. Loans can also be used to purchase land (including existing buildings), improve company assets, begin new construction projects, and renovate or upgrade existing buildings.  So, by spending less on your utilities, you can actually get more capital for your business improvement project!



Looking Ahead:  Ideal Candidates

Most for-profit businesses are eligible to receive SBA 504 financing, so long as they average less than $5 million in annual after-tax profits and $15 million in net worth.  Additionally, most national, regional, and community banks participate in the program..

Typical 504 borrowers:

Medical/Professional Retail/Service Industrial Special-Use
Doctor’s Office Restaurants Recycling Facilities Bowling Alleys
Veterinarian Offices Retail Stores Food Manufacturing Funeral Homes
Dentists Health Clubs Steel Production Car Washes
Attorneys Day Care Providers Packaging Companies Assisted Living
Accountants Pet Care Services Commercial Printers Grain Elevators
Chiropractors Farmers Markets Machine Shops Livestock Feedlots
Architects Boutiques Freight & Transport Mini-Storage
Graphic Designers Auto Repair Shops Wholesalers Sports Arenas
Physical Therapists Convenience Stores Mass Production Tennis Clubs


Funds from a 504 loan can be used for:

  • Acquisition of real estate (land and buildings)
  • Acquisition of equipment
  • Construction and renovation costs
  • Soft costs – the ability to include furniture, fixtures, and fees
  • Refinancing conventional loans

There is no limit to the total project cost with a 504 Loan. The SBA portion (40 percent of the total project cost) is capped at $5,000,000 or $5,500,000 for manufacturing projects or projects that implement green efficiencies.


Want to Learn More?

Keep in mind, we work in conjunction with local banks…not in competition with them.

Why Growth Corp?  We know small business.  It’s our passion.  We are proud to have helped thousands of businesses facilitate expansion.  As the largest 504 Lender in Illinois, we have dedicated ourselves to making the 504 Loan Program as efficient and seamless as possible.  In addition, we are an authorized Continuing Professional Education sponsor and can provide you with C.P.E. credits for our SBA 504 Loan Program update course.

Let’s join forces!  Make Growth Corp your partner in helping businesses discover the very best solution to their expansion or refinancing concerns…the 504 Loan Program. If you want to learn more, we would be happy to meet with you. Just give us a call at (217) 787-7557 or contact any member of our Lending Team.