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The New 25-year SBA 504 Loan Is Here

April 3, 2018 | SBA 504 Loans
SBA 504 loan, commercial real estate, CRE loan, CRE

The U.S. Small Business Administration has begun accepting applications for a new 25-year term SBA 504 loan, says an official notice released by the agency on Tuesday.

SBA 504 loans are designed for small businesses to finance commercial real estate or large equipment for use in business operations.

The new 25-year term loan will complement the 20-year and 10-year terms traditionally offered with 504 loans. The idea behind extending the payment cycle on a 504 loan is to reduce monthly loan payments for borrowers in the face of increasing operating expenses and interest rates, the notice said.

“With interest rates continuing to rise, this product comes along at a good time for small business owners who can benefit from a lower monthly payment and improved cash flow,” said Catherine Riddle, vice chair of the trade group National Association of Development Companies, or NADCO. Riddle is also the chief financial officer of leading small-business lender CDC Small Business Finance.

What are the 25-year term 504 loan features?

The SBA’s notice offers these important highlights:

“Market demand for this new loan product is expected to be high,” said Mike Owen, CDC’s chief credit officer. “Now’s a good time to discuss new loan requests with your CDC loan officer.”

How did the 25-year term loan come about?

The idea for a 25-year debenture was part of an ongoing, large-scale effort by trade group NADCO to make the 504 loan program more relevant in today’s lending marketplace, said CDC President and CEO Kurt Chilcott.

NADCO is a national advocacy group that represents certified development companies, or CDCs, and others who issue financing to small businesses through the SBA’s 504 loan program.

“Over the last 30 years, most commercial real estate lending has evolved to where 25-year and even 30-year loans are no longer the exception and are more the rule,” Chilcott said.

He credits NADCO and the SBA for advocating for the 25-year term loan product, which he hopes will help serve the needs of a broader pool of small businesses who are seeking financing.

“The consequence of a lower payment is that more small businesses can qualify because they have the cash flow for the lower payment,” Chilcott added.

Have questions? Reach out to an SBA 504 loan officer in your market to help you navigate the new 25-year SBA 504 debenture. For future industry updates and news about successful deals, sign up for our blog.

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4 responses to “The New 25-year SBA 504 Loan Is Here”

  1. Stacie Burks says:

    Sign me up for the blog

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  2. […] the idea for the new SBA 25-year debenture was part of a large-scale effort by trade group NADCO to make the 504 loan program more relevant in […]

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