Key Takeaways
- SBA 504 loans require only 10% down and offer fixed rates up to 25 years, making ownership accessible while preserving capital.
- 504 financing works for purchases, refinances, expansions, and packages real estate with equipment into one loan.
- Smaller banks can fund larger deals with 504 structure by covering only 50% of project costs while maintaining client relationships.
Here's a situation you've probably run into more than once: a solid business has strong cash flow, a great plan, and is ready to buy real estate. They qualify for conventional financing, but an SBA 504 loan would give them a lower down payment, longer fixed rates, more cash freed up for growth, or all three.
That's where SBA 504 becomes your solution instead of your fallback plan.
When you recognize which deals are natural fits for 504, you solve client problems faster and close deals that might otherwise go to competitors. Here are six CRE deal types where SBA 504 financing just makes sense for your clients, for you, and for getting deals done.
1. Your client is ready to stop paying rent and start building equity
Your client wants to stop paying rent and start building equity, but they don’t have enough cash or assets to cover the down payment for a conventional loan. If they plan to occupy at least 51% of the building that they purchase, a 504 loan can set your client on a path to ownership.
A 504 loan makes ownership accessible with just 10% down and fixed rates for up to 25 years. This means your client gets into ownership while keeping capital available for running their operations.
2. They’re seeking expansion and stability
Your client's business is growing and they need a new and bigger location, or are planning a major renovation. Conventional financing would work, but adjustable or variable rates create uncertainty exactly when your client needs stability most.
Expansion is risky enough without adding interest rate roulette to the mix. A 504 loan locks in fixed rates for up to 25 years, which means your client knows exactly what their payment will be in years five, ten, and twenty. There’s no surprise jumps when rates shift or scrambling to refinance a balloon payment when they should be focused on growing.
You get to be the partner who made that stability possible during a critical growth phase. That's the kind of move that builds lasting relationships.
3. A refinance would free up cash
Here’s another common scenario: your client's cash is locked up in sky-high monthly payments, or they're staring down a balloon payment that's about to come due. Either way, there's not enough cash left over for the things that actually keep the business running.
While everyone knows 504 as the "buying real estate" loan, it's also a refinancing powerhouse. Refinancing debt that qualifies (typically certain commercial real estate loans or other SBA loans secured with real estate) with a 504 can slash monthly payments and make balloon payments disappear. As a big bonus, owners can also use a 504 refinance to pull out equity for eligible business expenses to keep their business moving forward.
4. They need more than just the building
Manufacturing, food production, and medical facilities, are just some industries that will need serious equipment to go with their building. If your client falls into this category, they’ll have a tough time finding financing conventionally. Large down payment requirements and shorter loan terms often means piecing multiple loans together to meet all of the business’s needs, and neither you nor your borrower needs that amount of work!
SBA 504 loans package both owner-occupied real estate and long-life equipment into one financing solution. Together, we structure a deal where your first-position loan and the 504 portion combine to cover both the building and the equipment with longer terms than conventional financing would allow. Your client gets one cohesive package instead of juggling multiple loans, and they can focus on growing their operation. Here, SBA 504 makes for a simple and effective solution.
5. The business is strong, but liquidity is tight
Your client has great business with solid cash flow but just doesn’t have the liquid assets to cover a conventional 20% to 30% down payment. An SBA 504 loan is the solution. They get the financing they need while keeping the liquidity necessary to run their business even as they expand.
The 10% down SBA requirement means your client won’t have to liquidate investments or drain reserves. As a lender, you’re able to close a loan with a quality borrower and help them continue to grow their business.
6. They need more money than your bank can lend
At some smaller banks, client requests can outpace the bank’s lending capacity, which isn’t a fun conversation for anyone. If your client asks you for more funds than you can lend, the 504 structure helps you punch above your weight and offer larger loan amounts.
With SBA 504, banks are only responsible for funding 50% of the total project cost, allowing smaller banks to accommodate larger needs. You’ve worked hard to build a relationship with your client, this option lets you grow with them.
Let’s make small business loans happen
When you’re able to recognize these six types of deals, you can bring SBA 504 into the conversation early instead of scrambling for alternatives later. That's where partnering with RBAC makes all the difference. We've spent decades structuring 504 deals that help small businesses own their space and grow their operations, and we love seeing businesses put out that “new location coming soon” sign.
When you have a client who fits one of these scenarios, give us a call. We'll talk through the details and their lending options to structure the deal that works best. Meanwhile, you keep your first-position loan, their deposit accounts, and the relationship. You bring the deal, we bring the 504 expertise, and together we help your client turn possibility into reality.
