Lesson B102.11 · Business Finance 102: Bank-Ready
Where to borrow: bank, credit union, CDFI or an SBA 504 loan
6-minute read · Figures checked October 2026
Photo: Andrea Piacquadio / Pexels, Pexels License
The short answer
Match the lender to the loan. A bank or credit union is the usual first call for a line of credit or an equipment loan, and a credit union can lend only if you can join it and it has room for business loans. A certified CDFI is a mission lender built to reach borrowers other lenders don't. For a yard, a building or machinery with at least 10 years of useful life left, ask a Certified Development Company about an SBA 504 loan. Compare written offers by total cost and the payment in your slowest month.
Four places a pavement business can ask
| Bank | Credit union | CDFI | SBA 504 | |
|---|---|---|---|---|
| Who owns it | Shareholders | Its members | Varies: some are banks or credit unions, others are loan funds | A Certified Development Company (CDC) lends together with a senior lender |
| Who can use it | Anyone the bank accepts | Members only, within its field of membership | Its target market | Small businesses that meet SBA's rules |
| Good for | Lines of credit, equipment, vehicles, deposits | The same, if it makes business loans | Borrowers a bank turned down, newer businesses | Buildings, land and long-life machinery |
| Look it up with | The FDIC's BankFind Suite | The NCUA's Credit Union Locator | The CDFI Fund's list of certified CDFIs | SBA's list of Certified Development Companies |
Swipe the table sideways to see every column.
Banks
Most banks make business loans and lines of credit, and many have a business banker who will review your file before you apply. Deposits at an FDIC-insured bank are covered up to $250,000 per depositor, per FDIC-insured bank, for each account ownership category. How that applies depends on how your business is set up:
- A corporation, partnership or unincorporated association (including an LLC or S corporation): its accounts are insured up to $250,000 per business, separate from your personal accounts.
- A sole proprietorship, including a DBA account: the FDIC insures it as your own single account. It's added to your personal single accounts at the same bank, and the total is insured up to $250,000.
Lesson B102.3 covers what a bank looks for, and lesson B202.6 covers the questions to ask once you've banked somewhere for a few years.
Credit unions
A credit union is a not-for-profit cooperative owned by its members. To use one, your business has to fit its field of membership: the community, employer or group it's allowed to serve. Lesson P101.13 explains how people qualify.
At a federally insured credit union, the National Credit Union Share Insurance Fund covers deposits up to $250,000 per share owner, per insured credit union, for each account ownership category.
Business lending has a ceiling at a credit union. Federal rules cap a federally insured credit union's total member business loans at 1.75 times its net worth (with some loans excluded from the count). A small credit union may have little room left, so ask early whether it makes business loans of the size and kind you need.
CDFIs
A CDFI, or community development financial institution, is a lender the U.S. Treasury's CDFI Fund has certified as serving low-income communities and people who lack access to financing. Some CDFIs are banks and credit unions; others are loan funds. The CDFI Fund doesn't lend to businesses directly. It finances CDFIs, and they lend.
A CDFI loan is still a loan. Certification is about the lender's mission and who it serves, not about the rate, fees or terms, so read the written offer the same way as any other. Lesson P101.12 shows how to check the CDFI Fund's list, and lesson B102.8 covers SBA microloans of up to $50,000 through nonprofit lenders.
SBA 504 loans: the yard, the building, long-life machines
The 504 program gives long-term, fixed-rate financing for major fixed assets. Loans go through Certified Development Companies, SBA's community-based nonprofit partners, which lend together with a senior lender such as a bank.
- What it can pay for: buying, building or renovating buildings or land, and machinery and equipment with at least 10 years of useful life remaining.
- What it can't pay for: working capital, inventory, or speculative or rental real estate.
- Terms: 10, 20 and 25 years. The rate is pegged to an increment above the current rate on 10-year U.S. Treasury issues.
- Who qualifies: an operating, for-profit business in the U.S. that's small under SBA size rules, with a feasible plan and the ability to repay.
For most pavement equipment, that 10-year test is the first question. A sealcoat rig or a truck usually goes to a bank, credit union or equipment lender (lessons B102.5 and B102.6). A yard or a shop building is where 504 is worth a call.
Two paths: keep renting the yard or buy it with a long-term loan
Two ways to go
Keep renting a yard and shop, or buy one with a long-term loan such as an SBA 504?
Conservative path
Keep renting
Pay rent, keep your cash in the business, and save toward a down payment.
- Cash
- Rent each month and a deposit. No down payment, no closing costs.
- Risk
- The rent can rise, and the landlord can sell or decline to renew.
- Time
- Nothing to apply for now. Moving later takes planning.
- What goes wrong
- A lease ends at a bad time, or the rent climbs faster than your revenue.
Bolder path
Buy with a long-term loan
Buy the property with a 504 loan or a bank mortgage, with your own money in the deal.
- Cash
- Your share of the price up front, closing costs and fees, then a fixed payment for 10, 20 or 25 years, plus taxes, insurance and upkeep.
- Risk
- The payment comes every month in winter too, and the property is hard to sell quickly if work slows.
- Time
- An application with a Certified Development Company and a senior lender, an appraisal and a closing.
- What goes wrong
- The down payment drains your winter reserve, or the payment doesn't fit a slow season.
When each fits
Renting fits while revenue is still uneven, the business may move or grow out of the space, or the down payment would come out of your winter reserve. Buying fits when two or three years of returns show steady profit, the reserve stays full after closing, and the whole cost of owning fits your slowest months. Run the five Borrowing Rules from lesson B102.3 either way.
Different approaches
Where respected teachers differ
Ramsey's EntreLeadership teaches that the right amount of business debt is zero: build cash and be your own line of credit. Many owners use long-term loans for real estate because a fixed payment can replace rent that rises. NPMCA teaches cash first, and if you borrow, the five Borrowing Rules.
Your Move
Do this week
- Write down what you'd borrow for, the amount, and the most you could pay in your slowest month.
- Pick the lender types that fit that loan from the table above.
- Look up one of each near you: a bank on BankFind, a credit union you can join on the Credit Union Locator, a CDFI on the CDFI Fund's list and, for property, a Certified Development Company on SBA's list.
- Ask each one what it would need to see, and get any offer in writing.
Log it: Lender short list.
Common questions
Can a credit union make business loans?
Many do, but only to members, and federal rules cap a federally insured credit union's total member business loans at 1.75 times its net worth. Ask whether it has room and makes the kind of loan you need.
What can an SBA 504 loan pay for?
Buildings, land, and machinery or equipment with at least 10 years of useful life left. It can't pay for working capital, inventory, or speculative or rental real estate.
Is a CDFI loan cheaper than a bank loan?
Not necessarily. Certification is about the lender's mission, not its rates. Compare the written offers by APR, fees, total cost and the payment.
Are my business deposits insured?
At an FDIC-insured bank, a corporation's, partnership's or unincorporated association's accounts are insured up to $250,000 per business. A sole proprietorship's account counts as the owner's single account, added to the owner's personal single accounts at the same bank. Ask a federally insured credit union how its share insurance applies to your business account.
Watch out for
- Shopping by the monthly payment alone. Ask for the APR, every fee and the total you'll repay.
- Using a long-term property loan to cover a short-term cash gap. That's what a line of credit or your winter reserve is for.
- Taking a lender's word that it's a certified CDFI or a Certified Development Company. Check the CDFI Fund's list and SBA's list.
This lesson is general education, not legal, tax or lending advice. Talk with a lender, an accountant or a free SBDC adviser about your own situation.
Free help
- SBA: 504 loans and the list of Certified Development Companies
- CDFI Fund: CDFI certification and the list of certified CDFIs
- NCUA: Share insurance coverage; FDIC: BankFind Suite
- America's SBDC: Find your SBDC
Free practice
Lesson check
5 questions on this lesson, one at a time, with the answer and the reason after each. Pass with 4 right, including every must-know question.
This is general education, not tax, legal, investment or insurance advice. Rules change and every situation is different. Check the sources below, and talk to a qualified professional before you act on it.
Sources
- U.S. Small Business Administration: 504 loans (checked October 12, 2026)
- eCFR: 12 CFR 723.8, aggregate member business loan limit (checked October 12, 2026)
- NCUA: Share insurance coverage (checked October 12, 2026)
- FDIC: Deposit insurance at a glance and Your insured deposits: sole proprietorships (checked October 12, 2026)
- CDFI Fund, U.S. Department of the Treasury: About the CDFI Fund and CDFI Certification (checked October 12, 2026)
- Ramsey Solutions: 7 Tips for How to Run a Business Debt-Free (checked October 12, 2026)