For the Borrower

Reduces the amount of down payment required to purchase business real estate or equipment, or to construct a new building.  Typically 90% financing is available.

A lower down payment allows the business to conserve working capital, which may be used for growth and operating needs.

The interest rate on the SBA 504 financing is fixed for the entire term of the loan, thus eliminating interest rate risk and improving the business's ability to plan for the future.

Eliminates the risk of refinancing that is often inherent in bank financing.  The SBA 504 loans have term of ten or twenty years.

Leaves other assets available as collateral for other business loans.  SBA 504 is dedicated to project financing; inventory, accounts receivable and other business assets are typically left unencumbered and available to meet other credit needs of the business.

For the First Trust Lender

Reduces collateral risk.  The first trust loan typically has a loan to value ratio of 50% or better.

Reduces credit risk.  A lower down payment enhances working capital, making the business stronger and better able to withstand changes in its operating environment.
Reduces liquidation risk.  In the even of default and liquidation, the SBA may take out the holder of the first trust loan to protect their investment.

Provides Community Reinvestment Act credit.  SBA 504 loans are strongly CRA positive.  Extend legal lending limits.

Compared to the SBA 7A program there are no ongoing SBA reporting or servicing requirements.  There is not ’1502 reporting’ nor is there a monthly 50 basis point fee.  In almost all respects, the first trust loan is a ‘conventional’ loan.

Benefits to the Community

Stimulate the local economy through additional investment, job creation and job retention as well as broadening the community tax base.