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For many business owners, investing in commercial real estate is a critical to their company’s growth. But if you’re growing a startup or early-stage company, it can be challenging to obtain conventional financing. The U.S. Small Business Administration created the 504 loan program to address this scenario, and it’s one of the best options that enables small businesses to purchase real estate and equipment.

The 504 loan may be used to purchase an existing building, invest in machinery and equipment, construct a building or finance improvements to existing facilities. The borrower can provide as little as 10 percent equity, with the remaining 50 percent provided by a bank and 40 percent by a Certified Development Company backed by an SBA guarantee. Although the SBA portion of a 504 loan is capped between $5 million to $5.5 million, there is no limit to the total project cost if the borrower passes the SBA’s eligibility criteria.

The low down payment requirement — combined with 10- to 25-year terms with low interest rates — can help improve cash flow. Additionally, this loan allows closing costs and soft costs such as architectural or permit fees to be rolled into the loan instead of paid out of pocket — a significant benefit for small business owners.