Why People Choose SBA 504 Loan Over Conventional Loan: Top 3 Reasons

There is no doubt that Small Business Administration (SBA) and conventional bank loans are popular options for business owners who need short-term funding or need help paying for expensive equipment. An SBA 504 loan rates and a conventional loan feature lower interest rates, but they are fundamentally different. 



The SBA loan provides a partial government guarantee, whereas a conventional loan does not. Therefore, SBA loans typically have a higher amount, a low-interest rate, and a longer repayment.

A small business must understand that conventional and SBA loans are excellent lending options. As with both SBA and conventional business bank loans, these options are offered at a low cost and with flexible repayment terms.


Here's a comparison of SBA 504 loan vs. conventional loan


What is an SBA loan?

Small business loans are government-guaranteed loans, and the Small Business Administration guarantees up to 85% of loans issued by approved lenders. As a result, the lender is at a much lower risk of default if the borrower defaults.


Why choose an SBA loan over a Conventional Loan

Taking into account the fundamentals of each type of loan, here are some of the reasons for choosing an SBA loan over a conventional one:


Lower Interest Rates

Compared to conventional loans, SBA loans have a lower interest rate since the government guarantees the loan. An SBA loan currently costs between 4.39% and 13%. The rate you pay for your SBA loan depends on the type of loan, how much you borrow, and how much you repay.


A longer repayment period

There are many reasons why SBA loans may be a better choice than conventional business loans since the repayment terms of SBA loans are typically 25 years long.


There is minimal collateral

An SBA loan under $350,000 does not require any collateral. In other words, you do not need to worry about your assets being at risk when seeking an SBA loan.


A higher loan amount

Banks tend to relax their underwriting standards to approve SBA loans because the government guarantees them. In contrast to conventional business loans, you may be able to get a larger loan.


Adaptable

In contrast to conventional loans, SBA loans can be used for all business expenses and for more than one specific purpose. In contrast, conventional loans are generally only issued for a specific stated purpose. A caveat to SBA loans is that they cannot be used as tax relief.


Conclusion

The team at 504 Capital understands your business and its needs and takes the time to get to know them. You can count on us for SBA 504 loans.


504 Capital is the best SBA lender around. Our company has assisted hundreds of small businesses in growing. Give us a call. Get an SBA 504 loan today by visiting our website at https://504capital.com/ or calling 757623-2691!
Location: Virginia, USA

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