Entrepreneurs looking to start a small business have many financing options from which to choose. Determining the best funding choice is often dependent upon the business owner’s personal financial situation alongside the specific need for the money. For entrepreneurs looking to finance office or manufacturing space, SBA 504 loans might just be the ticket to get the property purchased, the doors open, and the profit wheels rolling.

What Is An SBA 504 Loan?

SBA 504 loans are one option the administration offers that were designed to not only help mom-and-pop companies get started but also boost the economy. These loans are long-term financing tools that are used to develop a community, so the small business applying for the funds must have a venture that will be beneficial to the growth and stability in his or her area. These loans are for U.S.-based and operating companies only, so those doing business overseas will not qualify.

Who Qualifies for This Type of Funding?

If you are a minority-owned business, including woman or veteran owned, or if your business classifies as a rural entity, you might qualify for SBA 504 loans to help get your venture off the ground. You don’t have to be a minority or rural business, but you will have to run your project through a Certified Development Company, or CDC, which is a nonprofit entity utilized to encourage economic growth in communities, to secure your funding.

What Can I Use the Money For?

This money cannot be used for daily operating costs or capital or debt consolidation. The SBA’s contingency on the money is that you must use it to purchase major fixed assets, which is why real estate is the primary reason entrepreneurs take out these loans. If you are looking to purchase land or a building wherein to conduct your business, 504 lending might be a viable option that would work well for you, as the loans are not only long-term but also come with a fixed interest rate.

Is This the Best Option?

Nobody can answer that question but you, but many people turn to SBA 504 loans because they have no other form of funding. Your personal and business financial assets will be taken into account when applying for the loan and you must fit within certain profit margins to qualify. These margins are broad, however, so there is a good chance that this loan would work well to get your small business venture off the ground and up into the stratosphere.