The Small Business Administration’s 504 loan program offers one of the most attractive financing options available to small businesses today. Key benefits include:

• Low down payment requirements

• Competitive fixed rates

• Long repayment terms

SBA 504 loans help business owners preserve working capital while making major investments in their company’s future.

Whether you’re considering your first commercial property purchase or expanding your manufacturing capabilities, understanding how SBA 504 financing works can open doors to opportunities that might otherwise seem out of reach. This comprehensive guide will walk you through everything you need to know about this powerful financing tool.

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What is SBA 504 financing?

SBA 504 financing is a long-term, fixed-rate loan program designed specifically for small businesses to purchase major fixed assets. Unlike traditional commercial loans, the 504 program focuses exclusively on permanent assets such as:

• Commercial real estate

• Buildings

• Heavy equipment

These assets will benefit your business for years to come.

Key purposes of the program include:

• Promoting economic development

• Supporting job creation

• Making affordable financing accessible

Three-party loan structure

The three-party loan structure is a unique arrangement that involves collaboration between three key entities: the borrower (your business), a Certified Development Company (CDC), and a private lender (such as a bank or credit union – that’s us!). This structure is designed to reduce financial risk for all parties while making it easier for small businesses to access the funding they need. Each party contributes a specific portion of the total loan amount, ensuring shared responsibility and fostering community economic growth.

Eligibility highlights:

• For-profit businesses only
• Net worth under $15 million
• Average net income of less than $5 million over the past two years
• Manufacturing companies: up to 500 employees
• Most other businesses: fewer than 100 employees
• At least 51% of project property must be owner-occupied
• Funds must be used for approved purposes (no pure investment properties)
• Must have adequate business cash flow to repay the loan
• Must have sufficient collateral, usually the financed asset

Benefits of SBA 504 financing

Businesses choose SBA 504 loans for several notable advantages:

Low down payments

Often as low as 10% of the total project cost, helping you preserve capital for other needs.

Fixed interest rates

Stay protected from market fluctuations with stable payments.

Flexible terms

• • Up to 20 years for equipment

• • Up to 25 years for real estate

Manageable monthly payments

Extended repayment helps smooth cash flow.

Program flexibility

Designed to adapt to your business needs

• • Refinance existing debt if improvements are being made

• • Structure financing to match business plans

What can SBA 504 loans be used for?

SBA 504 loans have defined, approved uses centering on permanent business assets:

Purchasing commercial real estate:

• Office buildings
• Retail spaces
• Warehouses
• Manufacturing facilities

Acquiring heavy equipment and machinery:

• Manufacturing equipment
• Construction machinery
• Restaurant equipment
• Medical devices

Renovating or constructing facilities:

• New construction
• Major renovations or upgrades (e.g., expanding space, upgrading HVAC systems, reconfiguring layouts)

Real-world examples:

• Restaurant owner: Purchases building and installs new kitchen.

• Manufacturer: Buys new production equipment and expands facility.

• Medical practice: Purchases office building and upgrades equipment.

How does SBA 504 financing work?

The typical SBA 504 project involves this financing breakdown:

1. Private lender: 50% of the project cost (conventional first mortgage)
2. CDC: 40% (SBA-backed debenture)
3. Borrower: 10% (down payment)

Benefits of the structure:

This structure offers several advantages. The first mortgage lender takes on less risk, as they only finance 50% of the project. This can make them more willing to lend. The CDC provides attractive, long-term financing for a significant portion of the cost. For the borrower, the low 10% down payment makes it easier to buy major assets without draining cash reserves.

Application process:

• Step 1: Find a CDC in your area.

• Step 2: Work with the CDC to prepare and submit your application.

• Step 3: Apply with both the CDC and a participating private lender.

• Step 4: Undergo parallel loan review and approval.

• Step 5: Expect the full process to take 60–90 days from application to closing.

Tips for securing SBA 504 financing

To improve your application’s success, follow these steps:

1. Prepare a comprehensive business plan

• • Explain how the purchase will benefit your business

• • Provide financial projections

• • Highlight job creation or retention

2. Gather required documentation:

• • Three years of business and personal tax returns

• • Financial statements

• • Detailed project cost breakdown

• • Environmental assessments (for real estate)

3. Work with an experienced CDC

• • Take advantage of their expertise and guidance

• • Leverage their network of lenders

4. Avoid common mistakes:

• • Underestimating costs

• • Missing job creation goals

• • Not allowing extra time for approval

• • Incomplete or late documentation

Tip: Start your application early and stay organized to minimize delays.

Take the next step toward business growth

Consider reaching out to a Certified Development Company in your area today. With proper preparation and the right partner, you could secure the financing that helps your business thrive for years to come. Whenever you need help along the way, our experienced commercial lenders will be here to guide you. Get in touch with us today by calling (800) 962-4452, or get started by clicking the button below.

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What started as a small operation in 2008 has grown into the region’s largest family and privately owned home service company. They are experts in four distinct trades: plumbing, HVAC, electrical, and drain/sewer services. But beyond their technical skills, they’re deeply committed to the people they serve. From donating over $25,000 annually to local charities to ensuring a real person always answers the phone, their motto, “We Take Comfort In Your Comfort,” rings true in everything they do. We sat down with the team for a Q&A to learn more about their history, their unique business needs, and their choice to partner with 91������ First.

Q: Can you briefly describe your HVAC business and what prompted you to purchase your own building?

A: Prior to purchasing our Howe Avenue property, I was a tenant of a smaller property located in Sutton MA which was not only limiting our ability to grow but also weakening our cash flow in that a good size monthly check was being paid to a landlord. My business outgrew our rental space, and when we found an ideal property to suit our needs, we began seeking lenders.

Q: What challenges or goals were you trying to address by owning your facility instead of leasing?

A: Becoming my own landlord would allow me to retain more earnings, and control the maintenance and quality of our space.

Q: How did the credit union support you throughout the building purchase process?

A: The support I got from WFFCU was second to none. Between environmental concerns and appraisals my transaction had challenges. It was great to have experts on my side to help push the process forward.

Q: Was there anything about the loan process that stood out compared to other financing experiences you’ve had?

A: The consistent check ins from the whole team while we moved towards closing kept everything on the right track.

Q: How would you describe the communication and responsiveness of the credit union’s commercial lending team?

A: Lightning fast. When I had a question- answers were given in days, sometimes even hours.

Q: How has owning your building impacted your HVAC business operations or growth?

A: Moving into our building allowed us to scale by 75% in the last 3 years.

Q: Did the financing structure help improve cash flow or long-term planning for your business?

A: The extra revenue stream from the rental income allows for access to extra CapEx cash.

Q: How well did the credit union understand the needs of your business and industry?

A: Very well! They were also very helpful with providing referrals for other services I needed for the building.

Q: Looking back, what part of the experience made the biggest difference for your business?

A: The easy lending approval and closing made the process stress free.

Q: How would you describe your overall experience in one or two words?

A: While unplanned expenses can pop up, as long as you have well written rental contracts, and keep up with routine maintenance (which never ends!) a commercial asset is a long-term win. That’s why it’s called REAL estate!

Ready to grow your business? Get started with commercial real estate financing today.

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Understanding how to access this equity is crucial for maximizing your real estate investment strategy. Whether you’re a seasoned investor with multiple properties or someone just getting started in commercial real estate, knowing your options can help you make informed decisions about leveraging your assets effectively.

The good news is that there are proven methods to unlock the value you’ve built in your investment properties, each with its own advantages and considerations.

Ways to access equity

Refinancing

This process involves replacing your current mortgage with a new one, ideally with better terms of a lower interest rate.  A cash-out refinance is a specific type of refinancing that allows you to borrow more than you currently owe on your property and receive the difference in cash. This option is particularly attractive when property values have increased significantly since your original purchase.

Here’s how it works: if your property is worth $500,000 and you owe $300,000 on your current mortgage, you might be able to refinance for $400,000, pay off your existing $300,000 loan, and receive $100,000 in cash (minus closing costs and fees).

The cash you receive can be used for virtually any business purpose—purchasing additional investment properties, funding renovations, expanding your business, or diversifying your investment portfolio. The interest on a cash-out refinance is often tax-deductible when used for business purposes, making it an even more attractive option for property investors.

The key to a successful cash-out refinance is ensuring that the new loan terms still support your overall investment strategy and that the property’s rental income can comfortably cover the higher mortgage payments.

At 91������ First, we understand that every commercial property investment is unique. Our commercial real estate loans support both owner-occupied and investment properties, with local decision-making that allows for flexible underwriting. This means faster approvals and terms that actually make sense for your specific situation.

Selling the property

Sometimes the most straightforward way to access equity is to sell the property outright. This approach gives you complete access to all the equity you’ve built, minus selling costs and any remaining mortgage balance.

Selling might be the right choice if you need a large amount of capital quickly, if the property no longer fits your investment strategy, or if you want to take advantage of a particularly hot real estate market.

However, selling does come with important tax considerations. If you’ve owned the property for more than a year, you’ll likely face capital gains taxes on any profit from the sale. The tax rate depends on your income level and can significantly impact your net proceeds.

You may be able to defer these taxes through a 1031 exchange, which allows you to reinvest the proceeds into another investment property of equal or greater value. This strategy can help you access equity while continuing to build your real estate portfolio without immediate tax consequences.

Commercial loan services at 91������ First

At 91������ First, we’ve been helping Massachusetts businesses and investors access the capital they need for over 95 years. Our commercial lending team understands that accessing equity in investment properties requires more than just competitive rates—it requires a partner who understands your goals and can provide flexible solutions. That’s why we offer a variety of loan solutions.

Commercial real estate loans

Perfect for purchasing, refinancing, or renovating existing facilities. We offer a variety of terms with multiple rate options and amortization schedules to fit your specific needs.

Commercial construction and development loans

For investors looking to expand through new construction or redevelopment projects. These loans work for both owner-occupied and income-producing properties, with flexible terms during the build-out phase and the ability to convert to permanent financing.

Commercial term loans

Designed for longer-term business investments, these loans can support fixed asset purchases or refinance existing business debt. They come with set repayment schedules and can be secured with various types of collateral.

Making the most of your property investments

The equity in your investment properties represents years of smart financial decisions and market appreciation. Whether you choose to refinance or sell your property, the key is understanding which option best aligns with your long-term investment strategy.

Each method of accessing equity has its place in a well-rounded investment approach. Refinancing can provide access to capital while maintaining ownership and potentially improving your loan terms. And selling gives you complete access to your equity when it’s time to move on to new opportunities.

The most successful property investors work with experienced lending partners who understand their goals and can provide the flexible financing options needed to achieve them. At 91������ First, we’re committed to being that partner for Massachusetts investors and business owners.

Ready to unlock the potential in your investment properties? Get started with our commercial lending team today and discover how the equity you’ve built can fuel your next opportunity.

Access Your Equity

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What makes construction financing for businesses different?

Funds for construction loans are given out in phases, after each step of construction is completed—not all at once upfront.

This process helps make sure money is spent properly as the project moves forward. It gives both you and the lender more control and security.

Types of construction loans at 91������ First

You have options based on your project:

Commercial construction loans for owner-occupied buildings

These loans are for businesses building facilities they plan to occupy themselves. They often qualify for SBA 504 loan programs, which can provide significant cost savings through lower down payments and favorable interest rates. The SBA 504 program is particularly valuable for owner-occupied construction projects because it allows businesses to finance up to 90% of the project cost.

Investment property construction loans

For businesses developing income-producing properties, aka building properties you plan to rent or lease. Real estate investors and developers use these loans to build rental properties, commercial spaces for lease, or mixed-use developments.

Renovation and redevelopment loans

Whether you’re updating an outdated facility, expanding current space, or completely reimagining a property’s use, these loans provide the funding needed for renovation on existing property.

Residential development loans

These loans are for building homes or apartment complexes.

How to qualify for a Construction Loan

To get a loan, you’ll need to show:

1. Strong financials

• Good business credit
• Solid cash flow to cover payments during construction
• Down payment (usually 20-30%; as little as 10% with SBA 504 for owner-occupied properties)

2. Project details

• Necessary permits and approvals
• Construction plans and budget
• Timeline for the project

3. Experience

• Your history with similar projects
• Reliable, licensed, and insured contractors

4. Collateral

• Usually the land and building serve as security

Applying for a Construction Loan: Step-by-Step

1. Prepare early

Collect financial statements, tax returns, a business plan, and contractor bids.

2. Submit application

Fill out forms and send all documents and plans to our commercial lending team.

3. Loan review

Underwriting and approval involves detailed analysis of your finances, the construction project, and contractor qualifications. This process typically takes several weeks as lenders verify information and assess project risks.

4. Loan closing

One you close on your loan you’ll get detailed instructions about requesting fund releases and requirements for each construction phase.

How the Construction Loan works after approval

Draw requests

To receive funding, submit proof of completed work—like invoices, photos, and inspection reports.

Regular inspections

You’ll have one of our trusted inspection partners check construction progress before each draw.

Track your budget

Track actual costs against estimates regularly and communicate with your lender if adjustments become necessary.

Stay on schedule

The faster the project finishes, the less interest you’ll pay.

Plan for conversion

Many construction loans switch automatically to standard ‘permanent’ real estate loans when construction ends, as long as you meet the required criteria.

Choose a partner who knows construction

Getting the right loan is key to finishing your project on time and on budget. Working with a lender who knows the local market and takes the time to guide you—like 91������ First—makes the process easier.

• Local expertise and flexible loan options
• Personal service at every step
• Award-winning commercial lending team

Ready to begin? Click here to get started with your Commercial Construction Loan.

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At 91������ First, we’ve helped countless Massachusetts businesses navigate their financing options. With deep roots in communities like Worcester and Boston, we understand the unique challenges and opportunities that local businesses face. Our award-winning commercial lending team has earned recognition as a top lender by Banker & Tradesman, reflecting our commitment to helping businesses succeed.

This guide will walk you through the main types of commercial loans available and help you determine which option best fits your business needs. We’ll also explain why working with a local credit union like 91������ First can make all the difference in your financing experience.

Types of loans for small businesses

Not all business loans are created equal. Each type serves different purposes and comes with distinct advantages. Understanding these differences will help you choose the financing that aligns with your specific business objectives.

Commercial real estate loans

Commercial real estate loans provide financing for purchasing, refinancing, or renovating business properties. These loans work well for both owner-occupied facilities and investment properties.

If you’re buying a building for your business operations or looking to expand into a new location, this type of loan makes sense. The property itself typically serves as collateral, which often means more favorable interest rates compared to unsecured loans.

Our commercial real estate loans offer variety in terms and rate options. We provide flexible underwriting with local decision-making, meaning your loan application gets reviewed by people who understand the Massachusetts market. For owner-occupied properties, you may also be eligible for the SBA’s 504 Loan Program, which can provide additional benefits and lower down payment requirements.

Construction loans

Construction loans support building projects from the ground up or major renovations of existing facilities. These loans are particularly useful for businesses that need to expand their physical footprint or developers working on residential projects.

The structure of construction loans differs from traditional term loans. During the construction phase, you typically pay interest only on the amount drawn. Once construction is complete, the loan can often convert to permanent financing, streamlining the process and reducing closing costs.

91������ First offers construction and development loans for both owner-occupied and income-producing properties. Our flexible terms during the build-out phase help manage cash flow during construction. Like our real estate loans, owner-occupied construction projects may qualify for SBA 504 financing.

Term loans

Term loans provide a lump sum of capital that you repay over a set period with a fixed repayment schedule. These loans work well for specific business investments.

Common uses for term loans include purchasing equipment, machinery, or vehicles for business operations.

The predictable payment structure of term loans makes budgeting easier. You’ll know exactly what you owe each month and when the loan will be paid off. These loans can be secured with various types of collateral.

Benefits of choosing 91������ for your business loans

Working with the right lender can be as important as choosing the right type of loan. Local credit unions like 91������ First offer several advantages over larger national banks.

Local decision-making

Your loan application gets reviewed by people who understand the Massachusetts business environment. Our commercial lenders live and work in the same communities as our members. This local knowledge means we can often approve loans that larger banks might reject due to rigid underwriting criteria.

Local decision-making also means faster responses. Instead of sending your application to a distant underwriting department, we handle the review process right here in Massachusetts. This can significantly reduce the time between application and approval.

Flexible terms

As a credit union, 91������ First operates differently from traditional banks. We’re owned by our members, not shareholders, which means we can focus on what’s best for our members rather than maximizing profits.

This member-focused approach translates into more flexible loan terms. We can work with you to structure payments that fit your cash flow patterns. We’re often able to accommodate requests that larger lenders cannot.

Award-winning service and support

Our award-winning commercial lending team provides personalized service throughout the entire loan process. You’ll work with the same team members from application through closing and beyond. This continuity means better communication and a smoother experience overall.

91������ First has earned recognition as one of America’s Best Regional Banks and Credit Unions by Newsweek and our commercial team has earned Top Lender awards from Banker and Tradesman. These awards reflect our commitment to exceptional service and financial stability.

How to apply

Getting started with a commercial loan at 91������ First is straightforward. The first step is connecting with our commercial lending team. It’s easy to get started online.

Our team will explain the application requirements and help you gather the necessary documentation. This might include business tax returns, financial statements, and details about the property or equipment you’re financing (or refinancing).

Once we receive your complete application, our local underwriting team reviews everything. We’ll keep you informed throughout this process and let you know if we need any additional information. Most importantly, we’ll work with you to address any concerns that arise rather than simply declining your application.

Ready to discuss your business financing needs? Let’s work together to find the right loan for your business goals.

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1. What inspired you to take on this adaptive reuse project, and how has 91������ First supported your vision?

I originally acquired 70 91������ Street and a number of the surrounding properties in 2014. The seller of the property was a partial owner-occupant, and the properties were in a state of disrepair. The location of the property is such that I always envisioned a conversion to residential units – either as for-sale condominiums or apartments for rent. 70 91������ Street was originally built circa 1920 so there was extensive due diligence required. Although this was my largest project to date, I had managed several successful projects with 91������ First as lender and my loan officer – Bryan Regele – invited CLO Talat Mufti out to both the site and a few of my other projects to better understand my vision and process. Both Bryan and Talat are local which provided what I believe to be a willingness to participate in a project which would bring market rate units to South Worcester.

2. How did 91������ First’s first mortgage development financing help you convert the industrial building into residential apartments?

91������ First structured the loan in a way that works very well for how a construction project transpires. I had equity in the site that allowed for 91������ First’s loan budget to provide sufficient working capital and reserves to carry through with minimal if any delays. Bryan is involved in all construction inspections which is important to me so he and I remain on good stead even when road bumps arise as should be expected on this type of project.

3. What role has 91������ First played in supporting your company, Gold Star Builders Inc., as the general contractor for this project?

Gold Star Builders Inc had primarily worked as a residential for-sale builder up until this project. I believe that by allowing us to serve as the primary contractor on this site that opportunities will arise to perform more work not only my other buildings on 91������ Street but likely for other real estate developers in the Worcester area.

4. What challenges did you face during this development, and how did 91������ First help you navigate them?

All projects have their challenges. To date though there has been nothing we have encountered at 70 91������ Street that has not easily been resolved. Bryan remains in close contact with me which is gives me confidence that 91������ First supports both me and the project.

5. Why did you choose 91������ First for your financing needs, and how has their support impacted your real estate projects?

91������ First values the community and its people. My relationship with them has always felt personal which makes me feel both valued and supported. They seem to approach each of my financing needs with solutions instead of problems. That is important for developers like myself.

Ready to make your vision a reality? Get started with commercial real estate financing today.

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