The top three reasons why somebody chooses an SBA 504 loan?
#1: the down payment.
It’s oftentimes half to a third the down payment of an ordinary conventional bank loan. This puts less of a burden on the borrowing business and gives it more leverage with its capital.
#2: the amortization.
Oftentimes, we’ll do a 25-year amortization on the first lien loan and a 20-year amortization on the second lien loan–that compares to a 15-20 year amortization with a conventional bank loan.
#3: the below-market long-term fixed interest rate of the second lien loan.
This is what I often call the best-kept secret in commercial financing. A lower interest rate with an SBA 504 loan allows for more focus to be set on putting the money to good use, not paying it back as quickly as possible.