If you are a small business owner, and you’re in the market for a Small Business Administration 504 Loan, there are various eligibility requirements that you should know about before applying. The financial professionals at Magnolia Bank have been serving the Hodgenville, KY, area with quality business banking products for over a century. Below they’ve answered the top questions about SBA loans. 

4 FAQs on SBA Loan Requirements & Eligibility

What Requirements Do I Need to Meet to Be Considered?

If you are considering an SBA loan, first you need to determine if you meet the basic qualifications. They include that you operate as a for-profit business entity, you have secured a private lender commitment for up to 50% of your project cost, and your business includes the goal of creating jobs that meet community development objectives. Review these items with your professional banker prior to applying for an SBA loan.

What Amount of Equity Do You Need to Apply?

If you are applying for an SBA loan, you need to secure a minimum initial investment of 10% of your project’s total amount. If your project involves the purchase or construction of a single-use facility in which to house or run your project, your investment minimum increases by 5%. This is the lender’s way of ensuring that you are serious about seeing your project through and paying back the loan amount over an agreed term. 

What Are the Terms of the SBA Loan?

If part of your loan will be used to purchase real estate, the term of the loan will be for a 20-year term. Purchase of equipment will generally have a 10-year repayment term. The interest rate remains low for small businesses to have the ability to successfully execute their business plans. It is based on a spread over the current market rate for 10-year U.S. Treasury issues and is determined when the loan is taken out. 

How Does My Business Need to be Structured to Qualify?

While the structure of your business will likely be determined by various tax and relationship factors, it is ultimately up to the lender to decide who to lend to. There are structure and entity requirements that need to be in place to satisfy the SBA requirements. Check with your lender as early as possible to find out their stipulations regarding this. 

If you’re starting a small business, and you’re ready to discuss qualifying for and taking out an SBA loan, the financial professionals at Magnolia Bank are on hand to assist you. Call them today at (270) 358-3183 or visit their website for more information.