As your business grows, a major consideration is the need for new space or for additional long-term equipment or machinery. Acquiring an existing building or constructing a new facility is a great way to build equity, control costs, and hold onto a long term investment, and may provide additional tax advantages versus leasing. Our loans are designed to help you buy, construct and improve commercial properties, as well as to buy and install long term machinery and equipment.
While conventional bank financing may make the cost of acquiring real estate and long term equipment difficult due to higher down payment requirements, REDCO and the 504 Program can help you achieve your goal through these key advantages:
- Low Down Payment. A typical 504 loan requires a 10% down payment, allowing your business to retain critical working capital for business growth or other needs (15% for start-up businesses with less than 2 years of operations).
- Low, Fixed Interest Rate. 504 loans provide a below market interest rate that is fixed for the entire life of the loan.
- Long Term, No Balloon. 504 loans are fully amortized over 20 years for real estate, and a 10 years for equipment and machinery. There is no balloon payment.
- Build Equity Vs. Leasing. Owning your commercial building provides security that a lease cannot. Owning offers control and financial advantages, including mortgage payments that are often less than the cost of rent, and a property that works for you rather than a landlord.
- Inclusion of Closing Costs/Eligible Soft Costs. 504 loans allow most closing costs to be incorporated into the financing. This includes appraisal and environmental fees, contingency costs, and most other closing costs such as title insurance and recording costs.
- 504 Loans Can Be Assumed. If you sell your property, the buyer can assume the 504 loan with the low, locked-in interest rate.
- Government Guarantee. 504 loans are guaranteed by the government and typically only require the property or equipment being purchased as collateral.