Small businesses: How to beat the interest rate hike

January 8, 2015 | Commercial Real Estate Loans

higher interest rates aheadWith the Federal Reserve signaling a long-anticipated interest rate increase in 2015, small business owners would be wise to take advantage of existing low rates in Small Business Administration (SBA) loan programs.

The 20-year fixed rate for an SBA-504 loan, which allows small business owners to buy or construct their own building or purchase large equipment, has averaged 4.8 percent for the last six months.  You can download information on how interest rates relate to small business growth – click HERE.

“For small business entrepreneurs who’ve been thinking about expanding, now is the time to invest in their companies before the interest rate start to climb,” said Kurt Chilcott, president of CDC Small Business Finance, a nonprofit that leads the nation in SBA-504 loans.

Banks and other lending experts have speculated that the federal government could start to bump up interest rates as early as this summer.

SBA-504 financing appeals to small business owners who are weary of paying rent and want to build equity for themselves.  The program allows entrepreneurs to access low-fixed-rate, 20-year financing upwards of $20 million with a minimal down-payment (10%).

“The SBA-504 loan is a great tool to help new small businesses grow, but it’s often not mentioned by financial advisors,“ said Chilcott.

The most significant advantages of SBA 504 loans include:
• Preserving cash to meet working capital needs
• Tax savings
• No additional collateral required
• No balloon payments

To qualify for an SBA 504 loan, businesses must be:
• Owner-operated
• For profit
• Organized as a sole proprietorship, corporation, partnership or LLC
• Have a business net-worth below $15 million and a net-profit after taxes below $5 million within the last two operating years

For a history of SBA-504 rates, click HERE.

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