504 financing refers to loans provided to small businesses to support specific projects under the Small Business Administration's (SBA) development company loan program. This program is authorized by Title V of the Small Business Investment Act of 1958. The financing typically involves a partnership between a private lender and a certified development company (CDC), which helps facilitate the loan process.
504 financing is primarily used in the context of business loans and economic development. It is relevant in areas such as commercial real estate, equipment purchases, and business expansion. Small businesses can utilize this financing to secure funding with favorable terms, often including lower down payments and fixed interest rates. Users can manage the application process using legal templates available through services like US Legal Forms.
Here are a couple of examples of abatement:
Example 1: A small bakery wants to expand its operations by purchasing a larger facility. Using 504 financing, the bakery secures a loan to cover the purchase price, enabling it to grow its business.
Example 2: A tech startup needs new equipment to enhance its services. Through 504 financing, the startup obtains funding to buy the necessary technology, allowing it to improve productivity and service delivery. (hypothetical example)
The primary statute governing 504 financing is the Small Business Investment Act of 1958, specifically Title V. This law outlines the framework for the SBA's development company loan program, including eligibility requirements and loan terms.
| Term | Definition | Key Differences |
|---|---|---|
| 504 Financing | Loans for small businesses under the SBA program. | Specifically for project financing with a combination of loans. |
| SBA Loans | General loans backed by the SBA for various business needs. | Can cover a wider range of business expenses, not just projects. |
| Conventional Loans | Loans from banks or credit unions without government backing. | Typically have stricter credit requirements and higher interest rates. |
If you are a small business owner considering 504 financing, start by assessing your eligibility and project needs. Gather necessary documentation and consider using legal templates from US Legal Forms to streamline the application process. If your situation is complex, consulting a legal professional may be beneficial.
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| Attribute | Details |
|---|---|
| Typical Loan Amount | Up to $5 million |
| Down Payment | As low as 10 percent |
| Interest Rate | Fixed rates, often below market rates |
| Loan Term | Typically 10 to 25 years |
Eligible projects include purchasing real estate, equipment, and improvements to existing facilities.