In this article, you will learn all about using an SBA 504 loan to finance a private school.

Public education in the United States is funded primarily through property taxes collected by each state. School districts are distributed money to fund building new schools, maintaining existing schools, and for paying teacher and staff salaries. Money is used to pay for utilities like water, sewer, and power.

Private schools have to raise their own money from donations and tuition that parents pay on behalf of their children.

Private schools, arguably, offer better education to their students in many cases. 

As of 2018 (the latest figures we could find), private schools were projected to bring in $68 billion in revenue. Private schools also employ nearly 1 million people nationwide.

Of course, many private schools operate as “for profit” businesses.

In any case, there is money to be made through owning a private school. Doing so offers the benefit of providing a quality education to the area.

However, building a school is expensive. You have to purchase the land, get plans drawn up and approved, build the school building, get it permitted, etc.

THEN you have to hire and train staff, turn on the lights, and make sure everything works day in and day out.

There are capital costs and operating expenses. Both of these types of expenses can be financed through SBA loan programs.

Today, we want to talk about using the SBA 504 loan program to acquire the land and construct the building.

SBA 504 loans can help reduce the overall burden of building a new school, which otherwise might be prohibitively expensive. Small enterprises can receive funding of up to $5 million through these loans, and that money can be put toward the purchase of real estate, the development of land, the construction of structures, and the acquisition of necessary equipment.

How can an SBA 504 be used to finance private schools?

The SBA 504 loan program can be used to finance private schools. 504 loans are available for businesses of all sizes and can be used for a variety of purposes, including the purchase or construction of buildings, equipment, and land.

The SBA 504 loan program is a great option for private schools because it offers low interest rates and long terms. This makes it easier for private schools to repay the loan and still have money left over for other expenses.

Another benefit of using an SBA 504 loan to finance private schools is that the loans are not subject to the same regulations as other types of loans. This means that private schools can get the financing they need without having to jump through all the hoops that other types of borrowers have to.

The benefits of using an SBA 504 loan to finance a private school

An SBA 504 loan is a great way to finance a private school. Here are some of the benefits:

1. Lower down payment: With an SBA 504 loan, you only need to put 10% down, as opposed to 20% with a conventional loan. This means you can get your school up and running sooner. The industry lingo for this is “equity injection.”
2. Longer repayment terms: You have 20 years to repay an SBA 504 loan, as opposed to 10 years for a conventional loan. This makes it more affordable for private schools, which often have tight budgets.
3. Lower interest rates: Interest rates on SBA 504 loans are usually lower than those on conventional loans, meaning you'll save money over the life of the loan.

Conclusion: Is an SBA 504 loan the right option for financing a private school?

In conclusion, an SBA 504 loan is a great option for financing a private school. The interest rates are low and the terms are flexible, making it an affordable and accessible option for many business owners. 

NOTE: Loans from the Small Business Administration (SBA) can be paired with other types of finance, such as loans from the SBA 7(a) program or traditional loans for small businesses.

Consult one of our experienced commercial loan advisors today.