A smarter way to leverage working capital right now

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With so much attention being paid to new Coronavirus Aid, Relief and Economic Security (CARES) Act, which is still evolving on a daily basis, don’t overlook an existing solution for small businesses that deserves a close look right now if your small business is looking to leverage working capital. The SBA 504 program – an established and highly successful program for business growth — is also a great option for small business owners financing eligible business-related debt, especially because long-term rates are at historic lows. 

Small business owners may refinance existing fixed-asset business debt to take advantage of the 504’s longer repayment terms (up to 25 years) and fixed interest rates, while providing access to equity for working capital. As with other 504 loan uses, borrowers can receive up to 90% financing when using a 504 loan to refinance debt.

Here’s a look at current rates, which are very attractive to consider right now.

This primer on how the 504’s debt-refinance option works, including the basics about eligible owners, businesses and expenses, comes from our colleagues at pursuitlending.com, one of the largest SBA lenders in the country. Read it here.

A real-world example from Upstate New York is a paper-goods manufacturer that saved nearly $50,000 each month and $300,000 in working capital when it refinanced existing business debt to reduce the monthly payments on a conventional commercial loan for existing fixed assets, while also accessing equity in the business’s assets to support working capital needs. As a result, the business is better positioned to innovate, compete and grow. The refinance provided significant cash flow savings, as well as the ability to create at least 10 full-time equivalent jobs over the next two years.

504 loans of typically between $50,000 to $5.5 million are available for qualified projects, with competitive fixed-interest rates and longer repayment terms than most conventional commercial real estate and major equipment loans for purchases and refinancing of these essential small business needs. Contact your bank, or other lenders that work in partnership with banks to support small businesses.