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The REAL Truth About SBA Loans
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The REAL Truth About SBA Loans

Last week, we got an email telling us that a new article about SBA loans had been published online. We’ve set up several Google Alerts so we can be notified when there’s news that pertains to our business and industry. (If you don’t use Google Alerts for your business, we recommend fixing that right away!) This email in particular told us about an article called “The Truth About SBA Loans” that appeared on the FOX Business Small Business Center. we clicked through and read the article with great interest, hoping to find some support for SBA loans and something we could share with others. Alas, we were disappointed. The author, Meredith Wood, doesn’t tell any untruths here, but she doesn’t tell the whole story either…and misrepresents the SBA 504 loan program in particular.

[If you like, you can read the article here for context. Just be sure to come back to get our take after you do.]

The Facts About SBA Loans

Wood begins by revealing an apparently deep, dark secret: that the SBA doesn’t actually make loans, but only guarantees them. This, however, is hardly groundbreaking news. In fact, it should come as a relief to anyone who didn’t already know it. We don’t think anyone really wants the government making long-term loans to small business owners.

SBA 504 Loans: For Fixed Assets Only

Wood moves on to give very brief descriptions of three types of SBA loans, including the 504 program. Here, she makes it clear that SBA 504 loans cannot be used for working capital or inventory (emphasis hers). This actually gets at what this article is really about: small loan alternatives for small business owners, such as factoring or cash advances. It’s true that SBA 504 loans cannot be used for working capital or inventory, but it’s also true that SBA 504 loans are the best choice for small business owners who want to buy/build/expand their commercial facilities or buy equipment (which is what the loan program is specifically designed to do). Wood simply points out what the 504 program doesn’t do and moves on rather than explaining what it does do (and does very well).

Sizeable Small Business Loans

The other half-truth here is that the maximum amount of a 504 loan is $5 million. What Wood doesn’t say is that this loan program finances total project costs, and the SBA/CDC portion of the loan is typically up to 40% of the total project cost. In other words, 40% of the project can be up to $5 million (or $5.5 million for manufacturing), meaning it’s possible to finance $12+ million projects. Our average per-loan project cost for 2014 is about $4.0 million, and our largest loan year-to-date is $12.1 million for a 428,000 square foot industrial facility in Bensalem, PA. Lots of people still think SBA loans are for small projects and small businesses that can’t get financing anywhere else. However, most of our clients are very bankable and choose an SBA 504 loan because it’s their best option.

Lingering Myths About SBA Loans

In a section about drawbacks to applying for SBA loans, Wood talks about lots of paperwork and a lengthy approval process. We have to say that she’s flat-out wrong on this one. First of all, there’s no more paperwork for an SBA 504 loan than any other commercial bank loan. Second, an SBA 504 loan shouldn’t take any longer than an ordinary bank loan. If it does, then the borrower should take issue with the lenders they chose to be involved in their project. The SBA has worked tirelessly to streamline the application process and specialist SBA lenders (ahem, like us) have developed the expertise to navigate the loan process with minimal delays (again, no more than with an ordinary bank loan, which are often complicated as well). Perhaps Ms. Wood should visit the section of our website devoted to dispelling lingering myths about the SBA so that she doesn’t continue to share these as fact.

We do agree with Ms. Wood that SBA loans aren’t for every small business and every situation. But we would urge anyone weighing their loan options to talk to an SBA loan specialist and not make any decisions based on one article that only tells part of the story.

Clearing the Air on SBA 504 Loans

So, what questions do you have about SBA 504 loans, the benefits of owning commercial property, or commercial real estate in general? What are your preconceived notions about SBA loans? Leave a comment below, or email us at, or call us at 1-866-622-4504 to share your thoughts. We have more than a decade’s worth of experience with SBA 504 loans, and we’d love the chance to fully explain what we’re about and how beneficial our program can be.

– Your 504 Experts

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  1. B0ob Schraitle says:

    What else would you expect from Fox News? If you haven’t figured it out by now, that Fox’s goal is to spew lies so that they can create fabricated issues that will frenzy up their viewership, then you’re not as bright as you appear. I have never, ever seen anything on Fox that isn’t spun to fit one of their issues. You may not be aware of this but Fox supports doing away with the SBA.

    • Kevin P. Clay CCIM says:

      Another load of crap from some Fox hater. stick to the facts. i know its difficult..

    • Tom Morris says:

      A typical liberal unfounded radical opinion.
      Please provide some specifics on FOX lies and your proof that each IS a lie.

  2. Rick says:

    Fox is so one sided I’m surprised they even know that there is a SBA

  3. jane altman says:

    I just asked SBA (through my banker) to allow me to consolidate not only their 7a loan, but all small loans that are choking me in order to revamp my business (mostly construction).
    Their response… no. I am still puzzled that they declined. All payments have been on time and my cr score is still 725. In fact, a year after my loan I asked when I was eligible to refi. Answer: 5 years.
    My construction projects meet that timeline.

    So, for you all out there thinking refi is possible… probably not. At least according to the new SBA guidelines. I checked on the web. It’s true.

    • Colleen says:

      If these loans are clogging up your cash flow they ARE eligible to be refinanced, especially if the lender is unable to provide further capital for you. They can be refinanced into one note and new capital added to it.

      There are two criteria. The new loan must provide a 10% increase in cash flow for you and the other is the loans must be unreasonable. SBA would say that if you are choked for capital and this refinance would get you out of that issue it would be eligible for refi.

      Check with an experienced lender.

    • Edward Holmes, Centinel Financial Corporation says:


      We are a SBA Service Provider located in Plano, Texas. We have a number of commercial banks who outsource their SBA functions to our company. We handle refinance situations like yours on a daily basis through the SBA 7(a) loan program. If you would like to discuss your needs, please call me at (972) 985-3225, ext. 201.



  4. Chris Hurn says:

    Thanks for commenting, Jane, but I think it’s best not to make generalizations from such a specific situation. Banks must consider various variables before making a loan: cashflow; credit (personal and business); collateral; etc. Not knowing the exact details of these (from you case), I can’t tell if it’s just your chosen bank who’s giving you a hard time or if the merits of your specific loan request really aren’t SBA-eligible. If you’d like to schedule a call with me, perhaps I can assist you in some way? I’m precluded from offering refinance loans myself (SBA 504 loans no longer allow for this), but maybe I can help you indirectly and refer you to someone I trust?

  5. Mike Peter says:

    Of course, if there wasn’t a Fox News, Stephen Colbert’s show would be a lot shorter…

  6. Kevin Riffey says:

    Nice article Chris. Very accurate and succinct. I wonder why Fox doesn’t allow the real experts to write articles about SBA loans. Or perhaps some editor with no industry knowledge chopped up the article so that it provides little or no value.

  7. Walter McLaughlin says:

    I agree with Chris. It could very well be your bank that’s simply unwilling to utilize the SBA. We do refinances periodically, and other than the cessation of the 504 refinance program, the rules as to debt refinance haven’t changed.

  8. Edward H. Holmes. Centinel Financial Corporation says:

    Enjoyed your article. Our company has been in the SBA business for 28 years, and we often see misconceptions regarding all of the SBA loan programs. Thanks for your article. It is unfortunate that FOX is taking this stance.


  9. Glamis says:

    Nice and on point comments! I love 504 loans. It is easier than a 7a loan because the loan already has collateral (the real estate property). The owner equity injection is 10%, closing costs are included in the project amount. In NYC this loan is used for restaurants, convenient stores, and other types of business as long as the owner occupies 51% of the property.
    Correct Chris, this is not for all and SBA guarantees the loan to give more security to the lender so the entrepreneur have access to capital. I will e-mail you soon. There is a lot to talk about this.

  10. Kharis Macey says:

    I thought those who apply for a bank loan thru the SBA had to be turned down by the bank. Kharis Macey

  11. Kharis Macey says:

    What I meant to say, seeking a loan from the SBA is the final resort, isn’t it? Kharis Macey

    • Trey says:


      That’s not true. You do not have to have been turned down by a bank before you apply for an SBA loan. Many of our small business clients have multiple choices when it comes to commercial real estate financing. They choose an SBA 504 loan because it affords them lower down payments (as little as 10% of the total project cost), longer terms, and below-market fixed interest rates. Ultimately they’re able to own commercial property without sinking all of their cash into it (it is a non-income-producing asset, after all).

  12. Jim says:

    FOX is not the bad guy here. And to generalize that they ‘spew lies’ is ignorant and off subject. They are a media company begging for content (especially in the online version) and like the general public do not know everything about our business. Yes, like me, they are inclined to think that the FED has gotten WAY TOO BIG, but in this case it is simply a bad source or a ‘general’ impression.
    It is up to us in the industry to – 1) Tell the truth and correct the misinformation when it is presented, and 2) to police our own. One of the reasons the public believes these myths is that we have a TON of less than reputable ‘lenders/brokers’ and perhaps even more than a TON of bad SBA bankers.
    The legends would go away if it were not for so many lenders who really do not know what they are doing and do require way to much back and forth, and eventually take way to long to say NO.
    As a SVP for one the few really good SBA lenders (7a and 504) we can help change the misperceptions.
    If I can help, call me 281-660-0777.

  13. Jorge Franchi, Ph.D. says:

    FOX News/FOX Business – they report, you decide.

    PS – Ms. Woods writes for

  14. John Goldman says:

    It is interesting that anyone should focus on the 504 SBA loan program as the total solution to the financing needs of a small business, and at the same time bring up red herring such as factoring as a reasonably solution,
    The SBA has an adequate alternatives that are designed for deserving small businesses.
    A SCORE mentor or similar should be able to ID the proper loan (including working capital & inventory),not try to fit the wrong loan program into any need.
    The 504 is a GREAT program that does not fill many needs, but when it is right, there is notheing better for cash strapped qualifying businesses.

  15. NailDriver5 says:

    Don’t be too tough on Fox, you should read some of the stuff distributed by CNN Financial. Most writers have an agenda. it is no compliment to Fox that she failed to thoroughly research her subject. Fox Business needs to raise the bar.

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