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504 vs. Ordinary Loans

We make owning commercial real estate a viable option for many small business owners who might not otherwise have the opportunity.


The SBA 504 loan has lower down payment requirements and also minimizes your cashflow considerations.



By allowing small businesses to put less money down and minimize their cash flow considerations, we make owning real estate an option for many small businesses that otherwise might not have the opportunity. Business owners can use their excess capital and increased cash flow to concentrate on growing their businesses instead of putting it into their real estate (a non-income-producing asset). And this is all in addition to the benfefits that come from simply owning instead of renting.

An SBA 504 loan provides up to 90% financing for commercial real estate with low monthly payments at below-market interest rates and in the process also creates new jobs for the community.

The following is a detailed comparison of the financing variables typically available to small business owners who want to acquire/construct their commercial real estate.


(SBA 504 Loan)


Bank Loan

Loan Amount Up to 90% financing of the total project cost (inclusive of land, construction/renovations, soft costs, and closing costs). 75% to 80% of the appraised value or purchase price, whichever is less.
Equity 10% of the total project cost. 20 to 25% plus closing and soft costs.
Term 1st Mortgage: 20 or 25 years.
2nd Mortgage:20 years.Usually 23 years blended. No balloons, only rate resets.
Frequently 5, 7, 10 or 15 years, then balloons.
Amortization 1st Mortgage: 20 or 25 years.
2nd Mortgage:20 years.Usually 23 years blended, fully amortizing.
15 or 20 years.
Pricing 1st Mortgage: Competitive fixed or variable rates.2nd Mortgage: Usually 0.5 to 0.75% less than
competitive rates and fixed for 20 years.* This is the least expensive financing available to
most small business owners for commercial
real estate.Both loans are assumable.

*The blended, effective rate of our 1st and
2nd mortgages is nearly always lower
than ordinary financing and is fixed for a
longer period of time.

Competitive fixed or variable rates.Usually not assumable.
Personal Guarantees Has them, but for strong credits, can be limited to pro rata ownership. Frequently has them.
Prepayment Penalty 1st Mortgage: 5-year or 10-year options, with the ability to pay up to 20% of principal annually without penalty.2nd Mortgage: 10-year, but because this is the least expensive financing, it makes better sense to prepay the 1st mortage with any excess cash. Sometimes has them, but frequently not.
Debt Service Coverage (DSC) At least 1.0x frequently without maintenance. Usually 1.2x or higher with maintenance.
Fees Usually 1.5% of 1st mortgage and 1% of 2nd mortgage. Blends to 1.27%, but is negotiable with strong credit scores. Usually 1.0% of loan amount.
Personal Credit Scores Usually no less than 600. Usually no less than 650.

Hopefully the above comparison helps you understand the benefits of an SBA 504 loan. If you have questions about this information, don’t hesitate to contact us so we can help clarify things for you.

Are you eligible for a 504 loan? Apply Today

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