The SBA 504 Loan Program should be your first consideration as you look beyond today’s adversity and prepare for a post-pandemic restart.
Preparing for a Post-Pandemic Restart
Let’s face it, the Covid-19 pandemic has thrown even the most prepared businesses into chaos. Many companies have slashed budgets and stalled plans during this time of economic uncertainty. However, at some point, economies will come back to life. How are you preparing for the post-pandemic restart? Here are three things to help you push-through and come out stronger post-pandemic.
Improve Cash Flow
Business owners faced with high-interest mortgages or upcoming balloon payments can greatly benefit from an SBA 504 refinancing loan. SBA 504 Loans allow access to existing equity while also locking in a low, long-term, fixed interest rate.
SBA 504 Refinance Loan Highlights:
- Lower monthly payments
- May be eligible for up to 6 months of no monthly payments if funded by September 27, 2020
- Preserves working capital
- Cash out for eligible business expenses including accounts payable, credit cards, lines of credit, etc.
- FIXED for 20 or 25 years on 504 loan – April rates are 2.96% and 3.03% respectively
To qualify:
- Debt to be refinanced was to purchase or improve commercial real estate
- The loan payments must have been current for the past 12 months
- The debt to be refinanced at least 2 years old
- The debt to be refinanced is a conventional loan and not a government backed loan
Control Overhead Costs – Own Your Facility
Entrepreneurs typically start their business in a leased facility. In fact, many small business owners think financing a commercial real estate purchase isn’t even an option because they’ve heard the down payment requirements can be very high. However, buying or constructing a new facility provides a great opportunity for fixing occupancy costs and locking in low interest rates. Other benefits include:
- Equity: every payment made is an investment in your future.
- Occupancy costs are stabilized: rent increases no longer apply and the SBA 504 payment is fixed.
- Preserves cash: in most cases, the monthly payment to own is less than a rent payment. The savings can be used to hire additional employees, buy inventory or invest in other growth strategies.
SBA 504 Real Estate Loan Highlights:
- Low Down Payment Requirements – For businesses looking to protect their cash flow or facing tighter cash flow 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.
- Fixed Interest Rates and Long Loan Terms – 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 rates for SBA 504 loans funded in April 2020 were a low 2.96%, fixed for 20 years. By locking in this low rate, which is fully amortized for up to 25 years, you’ll see predictable and lower monthly payments. Plus, borrowers may be eligible for up to 6 months of no monthly payments if funded by September 27, 2020.
- No Balloon Payments – 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.
- Includes Closing Costs, Soft Costs and Other Fees – All loans come with closing costs, which include appraisals, loan origination fees, etc. These expenses can add up quickly. Conventional financing typically requires all closing costs to be paid upfront, but SBA 504 loans allow you to roll them into the loan, thus preserving your cash. Not to mention, if you are expanding your business, the cost of equipment, furniture and fixtures, parking lots, architectural fees, etc. can also be rolled into the loan, saving you even more.
- 504 Loans Are Attractive To Conventional Lenders – SBA 504 loans offer banks a good deal, as well. Your 504 loan is a low risk for the conventional bank because they hold the first mortgage. They have a lien on the whole property, even though they are only financing a portion of it. It is an easy way for the bank to attract new business and to enlarge their impact in the community. This means that you are more likely to get financing from a conventional bank when you are backed by the SBA with a 504 loan. The bank may even give you better conditions than they would offer otherwise.
Streamline or Increase Production
Whether your business is product or service based, having the necessary equipment is vital to maintaining smooth operations. However, replacing, upgrading or purchasing new equipment can put a serious pinch on your cash flow. The 504 Loan Program offers business owners a more affordable and accessible way to get the equipment your business needs without making a substantial dent in your bottom line.
504 Loans are perfect for the purchase and installation of new or used, fixed, long-life machinery and equipment, such as:
- X-Ray or Digital Imaging Machines
- Manufacturing Equipment
- Dry-Cleaning Equipment
- Commercial Printers
- Food Processing Machinery
- Highly Calibrated Machines
- Equipment that generates renewable energy
SBA 504 Equipment Loan Highlights:
- Machinery and equipment can be financed independent of real estate
- Or, machinery and equipment can be financed in conjunction with a commercial real estate purchase
- Loan terms of 10-, 20- or 25-years are available (term length is limited to the useful life declaration provided by the manufacturer)
- May be eligible for up to 6 months of no monthly payments if funded by September 27, 2020
Companies that take this opportunity to look forward and explore new ideas can potentially come out stronger after the quarantine has lifted. When so much is unsure, the best way to plan for a post-pandemic restart is to try things you might not have otherwise.
Why Growth Corp?
Whether we are fulfilling our critical role as a provider of quality capital to America’s growing businesses, working shoulder-to-shoulder with clients to help them overcome challenges and capitalize on opportunities, or contributing to the communities in which we live and work, our impact has never been greater. We’d love to sit down with you and discuss your challenges and opportunities as you prepare for a post-pandemic restart. Contact any member of our Lending Team to get started.