Get a loan without a hefty down payment

Like buying a new car, you probably know when it's time to upgrade your veterinary hospital. Perhaps you're cramped and team members are falling over each other trying to work. Or maybe you're located off the beaten path, and clients need a GPS device just to find your facility. Whatever your reason, securing financing for your new digs may be easier than ever, thanks to the Small Business Administration's 504 loan program.

SBA 504 loans are available through Certified Development Companies (CDCs), who partner with traditional commercial lenders to provide these loans. Typically, 504 loans cover about 40 percent of the project financing, while practice owners provide a 10 percent down payment, and commercial lenders cover the remaining 50 percent. Here are the basics behind SBA 504 loans, courtesy of the National Association of Development Companies.

Who is eligible for 504 loans?

To meet the requirements, practices must:

> Have a net worth of less than $8.5 million and an average net profit after taxes for the last two years of less than $3 million

> Have land, buildings, or heavy equipment to use as collateral

> Create or retain one job for every $65,000 of 504 loan funding

> Be operated primarily by the practice owner (504 loans cannot provide investor-owned project financing)

How do 504 loans work?

> SBA 504 loans are pooled together and sold as 20-year bonds to investors. Since the bonds are guaranteed by the U.S. government, investors can accept a lower investment rate because they can't lose their principle. The August 2009 effective interest rate for a 20-year 504 loan was 5.393 percent, and 504 interest rates are fixed.

What are some of the advantages of a 504 loan?

> Competitive interest rate for the life of the loan

> 10-year or 20-year loan terms

> Low down payment (usually 10 percent)

> Up to $1.5 million for standard 504 loan

> Up to $2 million for special 504 loans (women, minorities, veterans, and other public policy goal projects)

> Unlimited commercial first mortgage loan amount coupled with the 504 loan

If you're looking for a space to call your own, contact your banker about the SBA 504 loan program.