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Reduce Down Payments and Overcome Appraisal Shortfalls with SBA 504 - BLP - Business Lending Partners
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Reduce Down Payments and Overcome Appraisal Shortfalls with SBA 504

With the Small Business Administration (SBA) 504 loan program, the property only needs to appraise at 90% of the total costs. This buffer can overcome regulatory loan-to-value restrictions for your financial institution.

Consider this case study:

A prospect wants to buy a $1,000,000 building. You propose lending 80%, or $800,000. However, the appraisal comes back at $900,000. Using the 80% LTV limit, your loan would be restricted to $720,000, requiring the prospect to bring an additional $80,000 in cash, potentially killing the deal.


Imagine you’re on the phone with that prospect to deliver the bad news, but then you recall an email about the SBA 504 loan program’s ability to help in such situations. At that moment, you could offer a solution that allows the borrower to retain more cash and lower their blended interest rate on financing.

The SBA 504 program allows for a 10% appraisal shortfall without changing the traditional 504 financing structure. Your loan could be reduced to $500,000, with an SBA loan of up to $400,000. The down payment could be as little as $100,000 instead of $200,000. Plus, the effective interest rate on the SBA 504 note is approximately 6.56% fixed for 25 years as of May 2024.

Appraisal shortfall case study comparison with and without SBA 504

The SBA 504 program enables you to serve your current clients while also obtaining new prospects. Through this program, you can enhance your commercial financial portfolio, positioning your institution as an innovative and strategic partner for your clients.


Wesley Walsh
Wesley Walsh
Loan Officer
Wesley Walsh's aptitude for navigating the world of commercial lending is outstanding and his passion for helping small businesses is second to none. Walsh graduated with Magna Cum Laude honors from UW-Eau Claire and previously worked at Associated Bank in Green Bay and as a business development officer at Tri City National Bank in Milwaukee.