Why Conditions Matter to the 504 Loan Program

The first 4 Cs of Credit – character, capacity, capital, and collateral – all deal with a company's financial history or current state of affairs. One would think a clean past and current financial strength would make lenders eager to produce a 504 loan, or any business loan. However, lenders are also concerned with the future, and how the future economic outlook may affect your business.

Why Collateral Matters to the 504 Loan Program

Today's topic is collateral, one of the 5 Cs of Credit that lenders use to determine their level of risk when offering a 504 loan, or any business loan. You may be thinking, "I've checked my credit reports and made sure my character hasn't been damaged. My business has good cash flow (capacity), and I've got plenty of skin in the game (capital). What more could a lender want?" Lenders do want more; they want collateral.

Why Capital Matters to the 504 Loan Program

To better understand capital, and its role in the 504 Loan Program, we must first explore the relationship between risk and return. This relationship is a fundamental idea in finance. Investors risk their money when buying stocks, on the chance of a reward in dividends. Lenders take a risk when loaning money to a business. The return on their risk is the interest paid on the loan.

Why Your Character Matters to the 504 Loan Program

In his play Romeo and Juliet, Shakespeare asks the question, "What's in a name?" When you need business financing, such as a 504 Loan, it turns out your name is worth a great deal. Lenders decide if you are a good risk by assessing your credit. Although every lending situation is different, most lenders use the Five Cs of Credit to determine the level of risk.

Preparing for a 504 Loan

Over 200 small businesses have used Community Business Finance's 504 Loan Program to finance a building expansion, buy commercial property, or purchase new machinery or equipment. We make the process easy to understand and can help you gather the right information.

Applying for a 504 loan requires forms and documentation just like any commercial loan. You should be prepared to describe your business, how you will use the loan proceeds, and establish an ability to repay the loan.

504 Loans in the News

We here at Community Business Finance love helping our clients achieve their business dreams. We celebrate each loan as the first step in another success story. It turns out we aren't the only ones singing the praises of the 504 Loan Program. There is an excellent article from CBS MoneyWatch that shines a light on how powerful a 504 loan can be.

Personal Guarantees and the 504 Loan Program

I am often asked why the SBA requires personal guarantors for 504 loans. There are several reasons for this. First understand that personal guarantees are required on all SBA loans. A personal guarantee is not a sign that your business is unhealthy or risky. Even businesses with a solid performance history and an excellent credit rating will be required to sign personal guarantees.