It’s a tool from the U.S. Small Business Administration designed to drive local economic growth using regional Certified Development Companies, or CDCs, as the point of contact with commercial lenders. The lender puts the loan together for the client in partnership with the CDC. So how does it work?

To find out, I sat down with Andrew Soule, assistant vice president at Union Community Bank. Andrew is well-versed in SBA 504 loans and pointed out these loans are generally far better terms for the borrower than traditional commercial lending. The three main advantages are:

1. Lower rates (currently about 4.61 percent).
2. Longer, fixed terms (10 to 20 years most commonly) vs. three to five years.
3. Low down: 10 percent versus 20 to 40 percent for traditional lending.

The loan can be used for real estate, buildings, improvements, modernizations and long-term equipment. Not covered items would include inventory, goodwill or working capital. There are caps and other details but overall this program is adaptable to many opportunities.

Even better is SBA 504 loans are offered for refinancing using most of the same terms. So if your business is at a juncture where things are tight equity-wise and/or there’s a crying need to expand your space, etc., utilizing the SBA program might result in significant savings or even getting the loan rather than not. One important point here is that SBA has set a sunset date of Sept. 30, 2012, for the refinance program.

Andrew’s bank partners with the Economic Development Company of Lancaster to process and approve the loans, and they have done several this year alone.

“When I present this program to my business clients alongside a traditional commercial loan product, they almost always go for the SBA 504 loan,” he said.

If you’re interested in learning more about these worthwhile commercial lending options check out the SBA 504 website. Andrew would be happy to go through the various but straightforward qualification pieces at asoule@unioncommunitybank.com. From my discussions with local players it seems clear the SBA 504 loan option looks like a great tool for revitalization and expansion, right when we could use it.

Jeff Geoghan is a real estate agent and founder of www.yourlancasterhome.com in Lancaster County. He also hosts “YourLancasterHomeTV (tv.yourlancasterhome.com).” He also holds a Green designation from the National Association of Realtors and blogs about homes and green issues.