Small businesses are nothing new to the United States. In fact, I would argue that they’re practically the backbone of America in many ways. While a lot of us are concerned about rising inflation rates and the troubling economic trends we’re seeing, there is evidence that these institutions are still experiencing high levels of revenue.

That being said, budgets remain tight for many of them. What are the available options? It can be hard to know them, exactly, but one of the big ones is taking out a loan. Unfortunately, a lot of them are risky and don’t pay off in the long run. Something like an SBA 504 loan is a special case, though – let me explain.

What They Are

They are specifically designed for the needs of small business owners, which is why I think it’s a good idea to put more information out there about them! I feel there hasn’t been enough coverage on it in general, given everything that’s going on in the world. What makes them different from some other types is that they are federally backed.

However, they are not directly dispersed by the government. Rather, they are provided through another organization like a bank or development company. So, that sets them apart from some other federally backed ones, even.

They are sponsored by the Small Business Administration, known as “SBA” – hence the acronym at the front of the term. Usually, the rates they offer are low, to allow for greater growth in the sector. Funds can be used for several things, including expensive equipment or machinery.

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How do They Work?

Now that I’ve answered the question of what is an SBA 504 loan, you’re probably wondering how they operate. As I stated above, their primary purpose is to encourage economic development, especially regarding growth in small businesses. However, that doesn’t really tell you what they involve.

What sort of financing do they bring to the table? It’s fairly generous. You can receive up to five million dollars through them, which is certainly helpful for anyone needing large-scale equipment. The agricultural sector seems to be one of the main targets.

Often, providers package two or more loans into one when offering a 504. The development company might be a part, and then a credit union or other lender funds the other bits. It tends to vary based upon the servicer, so if you have concerns, be sure to voice them.

The final note I would like to make here is that this is not considered taxable income. For those of you who dread that time of year (myself included), this is certainly a relief. I know I’m really not a fan of more paperwork and headache.

Why it Matters

This is probably the biggest question that I need to answer today. Sure, knowing about it is great, but why should we care? Well, part of what the Small Business Administration does is helping to inject more funds into the economy to stabilize it. You can read more about it here:

Still, they aren’t the be-all and end-all of this process. Getting other lending services involved can make a huge difference in terms of the amount that can be distributed. After all, the government runs on a budget – sharing the burden is hardly a novel idea, but it is comforting to see applied in this manner.

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If you didn’t know, several sectors of our economy have been at risk for some time now. Perhaps the most critical one I can think of is agriculture. Private farmers have a harder time now than ever getting supplies and equipment that are critical to their success. A big part of that is monetary roadblocks.

So, having options out there to assist in that is hardly a bad thing. I, for one, like to know where my food is coming from. When I can, I want to source it as ethically as possible. For me, that involves shopping locally and from privately owned farms or businesses in general.

So, if you’re interested in that as well, consider visiting a farmer’s market for your produce or supporting these organizations in other ways. And, if you are a small business owner who is having a hard time supporting yourself, take solace in that there are new options popping up all the time to keep yourself afloat.

Hopefully, as global events settle a bit and we get back on track, we won’t have to worry so much. In the meantime, though, we should do whatever we can to ease the hardships in our own lives. If a piece of machinery or equipment will make a huge difference for you, you shouldn’t feel like it’s completely out of reach. Investigate your options and decide what will be best for you.