So, you’re thinking about getting an SBA 504 loan to help your Kentucky business grow? That’s awesome! But before you jump in, there’s one important thing you need to know: the down payment requirement.
The minimum down payment required for an SBA 504 loan is 10% of the total project cost. But there are a few factors that can affect your down payment requirements, such as the type of business you operate, how long you’ve been in business, and the location of the property you’re buying.
If you’re not sure how much of a down payment you’ll need, don’t worry. The Capital Access team is here to help! We can help you assess your eligibility, determine your down payment requirements, and prepare your application.
Here are a few tips for reducing your down payment requirements:
- Work with a CDC. Capital Access is a nonprofit organizations that specialize in helping small businesses secure SBA 504 loans. We may be able to offer you additional financing options, such as subordinate loans or gap financing, to help you reduce your down payment requirement.
- Improve your business credit score. Your business credit score is one of the most important factors that lenders will consider when determining your loan approval and interest rate. By improving your business credit score, you may be able to qualify for a lower down payment requirement.
Needing to borrow from another source for the down payment of an SBA 504 loan?
One way to reduce the down payment requirement for an SBA 504 loan is to borrow money from another source. This could be a personal loan, a business loan from a bank or credit union, or a loan from a friend or family member.
If you are considering this option, it is important to compare interest rates and terms from different lenders. You should also make sure that the loan you choose is compatible with the SBA 504 loan program.
Here are a few tips for borrowing from another source to narrow down the down payment for an SBA 504 loan:
- Get pre-approved for a loan before you start looking for property. This will give you an idea of how much money you can borrow and what your monthly payments will be.
- Shop around for the best interest rates and terms. Don’t be afraid to negotiate with lenders.
- Make sure the loan you choose is compatible with the SBA 504 loan program. Some lenders may have restrictions on how you can use the loan proceeds.
Here are some specific examples of how you can borrow money from another source to narrow down the down payment for an SBA 504 loan:
- Home equity loan: If you have equity in your home, you may be able to borrow money against it to use as a down payment on the SBA 504 loan.
- Personal loan: Personal loans can be used for a variety of purposes, including making down payments on loans. However, interest rates on personal loans can be higher than interest rates on other types of loans.
- Business loan from a bank or credit union: Banks and credit unions offer a variety of business loans, including loans for down payments.
- Loan from a friend or family member: If you have a friend or family member who is willing to lend you money, this can be a good way to get a down payment without having to pay interest.
It is important to note that the SBA does not allow borrowers to use personal savings to cover the down payment requirement for an SBA 504 loan. However, you can use personal savings to cover other closing costs, such as appraisal fees and title insurance.
If you are considering borrowing from another source to narrow down the down payment for an SBA 504 loan, please contact CAC-KY today. We can help you assess your options and find the best solution for your needs.
Ready to take the next step? Contact CAC-KY today to learn more about the SBA 504 loan program and how we can help you secure the financing you need to grow your business.
To close this out, here’s a creative analogy to help you understand the down payment requirement:
Imagine you’re buying a house. You need a down payment to show the seller that you’re serious about buying the house and that you’re financially stable. The SBA 504 loan program is similar. The down payment requirement is a way for the SBA to show that you’re serious about your business and that you’re financially committed to its success.
Just think of the down payment as an investment in your business’s future. It’s a way to show the world that you’re serious about growth and that you’re ready to take your business to the next level.