The SBA 504 loan program offers a compelling solution with its fixed-rate financing option that provides stability in uncertain times.
This blog explores the advantages of SBA 504 loans, recent program updates, and how BDC Capital can help businesses secure these loans.
What Are SBA 504 Loans?
SBA 504 loans are government-backed financing options designed to help small businesses purchase major fixed assets for expansion and modernization.
These loans typically involve three parties:
- A conventional lender (usually a bank) providing 50% of the financing
- A Certified Development Company (CDC) providing 40% (backed by the SBA)
- The borrower contributing 10% as a down payment
This structure allows businesses to finance up to 90% of project costs, significantly reducing the equity required compared to conventional commercial loans.
The Fixed-Rate Advantage
The standout feature of SBA 504 loans is their fixed interest rate, which remains constant throughout the loan term - up to 25 years for real estate and 10 years for equipment. This fixed-rate structure provides several critical advantages:
Protection Against Rate Fluctuations
When market interest rates rise, businesses with variable-rate loans face increasing monthly payments, potentially straining cash flow and disrupting financial planning. With an SBA 504 loan, your rate is locked in at origination, ensuring payment stability regardless of market changes. If rates drop, you can refinance, sometimes with cash out.
Long-Term Financial Predictability
The extended repayment terms, especially for real estate (up to 25 years), allow businesses to spread payments over a longer period. This reduces monthly financial burdens and frees up cash for operational needs and growth initiatives.
Competitive Pricing
SBA 504 loans typically offer interest rates below market rates for comparable financing options. This competitive pricing, combined with the fixed rate, provides a cost-effective solution for long-term asset financing.
2025 SBA 504 Program Updates
Recent updates have made the SBA 504 program more accessible and affordable for small businesses:
Fee Reductions
For loans approved in fiscal year 2026, the SBA has reinstated the upfront guarantee fee to 0.5%, with an annual service fee of just 0.209%, down from 0.331% of the outstanding loan balance. These reductions result in substantial cost savings for borrowers. After year four, the lower servicing fee offsets the added 0.5% guarantee fee, resulting in substantial savings over the life of the loan.
Streamlined Application Process
The application process has been simplified, and eligibility criteria have been expanded, making it easier for more businesses to qualify for these loans.
Enhanced Debt Refinancing Options
Recent rule changes have made it easier for small businesses to refinance existing debt using the SBA 504 program, allowing businesses to reduce debt payments or access more affordable capital for expansion.
How New England Certified Can Help
As an affiliate of BDC Capital Corp., the oldest business development corporation in the United States (founded in 1953), BDC Capital brings over 72 years of experience to the table. Having invested more than $2.3 billion in over 8,300 New England businesses, they offer specialized expertise in SBA 504 loans.
BDC Capital can assist with financing for:
- Working capital needs
- Machinery and equipment purchases
- Real estate acquisition and construction
- Business acquisition and expansion
- Debt restructuring
- Inner city and community projects
Their team of experts understands the intricacies of the SBA 504 program and can guide businesses through every step of the process - from determining eligibility to securing the best possible terms.
Is an SBA 504 Loan Right for Your Business?
SBA 504 loans are particularly well-suited for businesses that:
- Plan to purchase, construct, or renovate owner-occupied commercial real estate
- Need to acquire equipment with a useful life of at least 10 years
- Want to refinance existing debt related to fixed assets
- Seek to minimize down payment requirements (as low as 10%)
- Value long-term payment stability through fixed interest rates
Get Started With New England Certified
In today's volatile market, the ability to secure fixed-rate financing through SBA 504 loans offers small businesses a valuable opportunity to invest in growth while protecting themselves from interest rate fluctuations. With recent program enhancements making these loans more accessible than ever, now is an excellent time to explore this financing option.
For more information about SBA 504 loans and how they can benefit your business, contact New England Certified today. Their experienced team can help you navigate the application process and secure the financing you need to achieve your growth objectives.
