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The SBA 504 solution

A Small Business Administration program allows business owners to purchase real estate with 10% down and at a below-market interest rate.

The SBA 504 solution
The construction and outfitting of Pet Emergency & Specialty Center of Marin was financed using SBA 504 loans.

Veterinarians who own their practice should absolutely own the building. The benefits of owning outweigh those of leasing, and deciding to purchase a building is one of the most significant steps a business can take toward securing its future.

When you own your building, you have peace of mind. Occupancy costs will be steady month after month, and you can customize the space to fit your needs. The work put into the building adds value to the property that ultimately you will prosper from, not the landlord. There are also tax benefits to building ownership. Most importantly, though, you will be building equity and investing into your future.

While the undertaking might seem intimidating, there is a financing solution that makes the step easier by offering 90% financing and a long-term, below-market, fixed interest rate.

Consider a 504

A Small Business Administration 504 loan is a sound option for veterinarians looking to purchase a building for their business. Whether you’re expanding to a new location or would prefer to own rather than lease, the 504 loan can offer unbeatable terms.

Highlights of the SBA 504 loan include:

  • Low down payment: Paying only 10% of the purchase price allows business owners to conserve working capital.
  • Below-market interest rate: A fixed-rate loan fully amortized over 25 years means your monthly payment stays the same, and there is no balloon payment at the end of the term.
  • No additional collateral: The only collateral required is the subject property.
  • No loan limit: You can think big.
  • Support: Business owners who utilize the SBA 504 program get ongoing support from a certified development company. The CDC guides business owners through the loan process, helps with the paperwork and application, and is a partner through the life of the loan.
  • Versatility: While the SBA 504 loan is most commonly used for real estate, it also can be used to renovate existing facilities, purchase equipment with a service life of 10 years and refinance commercial real estate debt.

The Loan Structure

SBA 504 loans are administered by CDCs and granted in conjunction with a conventional lender, such as a bank or credit union, which provides 50% or more of the total project cost. The CDC facilitates the SBA loan for up to 40 percent of the project total, or $5 million ($5.5 million if the project is eligible for the SBA’s Green Energy Program). The business owner provides 10% of the project cost as a down payment. The loan can have a 10-, 20- or 25-year term.

SBA 504

A Case Study

Pet Emergency & Specialty Center of Marin was founded in 1998 and provides round-the-clock emergency and specialty care throughout the San Francisco Bay Area. Owner Jim Clark secured his first SBA 504 loan, at a 20-year fixed rate, to purchase the property for $1.55 million. He obtained a second 504 loan to finance building improvements and equipment worth $1.9 million.

“The building we’re in now was designed to make the lives of our staff easier and more comfortable,” he said. “It helps us attract the best of the best to ultimately provide the best care possible to our patients.”

Getting Started

Deciding to buy a first building for your business can be scary, but the benefits to owning far outweigh those of leasing, and the SBA 504 program makes purchasing real estate easier.

If you would like to see your veterinary practice grow, get prequalified. The 504 loan provides accessible financing with flexible, cost-effective options that can make expanding a veterinary practice achievable. This is good news for pets and their humans.

Kurt Chambliss is executive vice president of TMC Financing, which over the past 40 years has provided nearly $10 billion in SBA financing to more than 5,000 businesses throughout California and Nevada.

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