Current All-In Rates: 5.25% (10-year), 5.49% (20-year), and 5.53% (25-year)
Rappahannock Economic Development Corporation

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REDCO/SBA 504 Loan Conventional Bank Loan SBA 7(a) Loan
Down Payment Usually 10% 20%-25% 10%-30%
Term of Loan 20 years for real estate, fully amortizing;
10 years for machinery and equipment, fully amortizing.
Determined by the lender.

Typically, real estate amortizes over 20 – 25 years, with a balloon/maturity at 10 years.

Typically, machinery and equipment is 3-7 years.

Depends on ability to repay. As long as 25 years for real estate, and 5-10 years for machinery and equipment. Loan is fully amortizing with no balloon.
Interest Rate Fixed for entire term of the loan. All-in rate is currently under 5.00% Determined by lender. Typically fixed for 3-7 years, then adjusts at determined periods to current market rates through loan maturity. Depends on term of the loan, with maximum rates as high as Prime + 4.75%. Can be fixed or adjustable, as determined by lender.
Loan Size REDCO/504 loan amount $100,000-$5.50 million.

Note that there is no maximum project size. The 504 loan amount is limited to the above, but the 1st trust lender can lend more than 50% of the total project costs.

Determined by lender. $5 million
Collateral Generally, project assets being financed are used as collateral.

Personal guaranties of principal owners with 20% or more ownership stake are required.

Generally, project assets being financed are used as collateral.

Personal guaranties of principal owners with 20% or more ownership stake are required.

Generally, project assets being financed are used as collateral.

Pledge of personal residence or other assets may be required.

Personal guaranties of principal owners with 20% or more ownership stake are required.

Best Use Owner occupied real estate (at least 51%); machinery and equipment finance. Real estate. Short-term or long-term working capital, business acquisition, refinance existing debt, purchase FF&E.
Advantages 1. 10% down payment preserves working capital;
2. Lowest rate of any government guaranteed business loan;
3. Long term financing
4. Ability to include soft costs and fees in total project costs/financing;
5. Diversifies business investments and provides stability.
Competitive lending market may drive bank rates and fees down. 1. Short term working capital;
2. Popular program with banks, allowing financing that may otherwise be outside of their normal lending policies.
Disadvantages Limited to owner-occupied commercial real estate and machinery and equipment with lifespan of 10 years or longer. 1. Higher down payment reduces business liquidity;
2. Variable loan rate that can increase over time;
3. Loans typically have balloon payments;
4. Additional loan covenants may be restrictive to the business.
1. Typically higher rate and fees;
2. Variable loan rate that can increase over time;