Great Benefits!
With SBA 504 financing, entrepreneurs can purchase commercial real estate with a down payment as low as 10%. The small business owner not only gets the tax benefits and appreciation on the real estate, but also locks in occupancy costs for the long term with financing tailored to the entrepreneur’s needs.
(Above Photo) Anderson Engineering staff in front of their new building. SBA 504 loan provided by SPEDCO in New Brighton, MN.
Enhanced Cash Flow & Low Down Payment: With financing available for up to 90% of the project cost, SBA 504 loans offer an affordable down payment, enabling the entrepreneur to conserve working capital and retain liquidity to meet operating needs.
Comparison of Conventional Loan with an SBA 504 Loan
Long Term Financing at Competitive Interest Rates: SBA 504 real estate financing is 20-year, fully amortized financing. This enables a small business owner to pay for a facility over the long term, avoid risky loan call provisions and enjoy lower monthly payments. For current interest rates, click on SBA 504 Interest Rates on this site.
Predictable Monthly Payments: SBA 504 financing allows small business owners to fix their business occupancy costs with an attractive, 20-year, fixed interest rate.
Ownership Options Tailored to Meet Small Business Owner Needs: An entrepreneur can purchase and hold title to a building personally, in the name of the business or even set up a holding company for the real estate. This gives the small business owner the flexibility to maximize tax benefits of ownership and minimize liability in the manner best suited for the entrepreneur and his company. Additionally, two or more small businesses can receive an SBA 504 loan if they combine to create a real estate holding company. For instance, this option works especially well for professionals in the medical, veterinary, legal and accounting fields.
How it Works
(Above Photo) Hunter Animal Hospital in Salt Lake City, UT - SBA 504 Loan provided by Mountain West Small Business Finance in Salt Lake City, UT
How Big is Your Project?
Most growing businesses are adding staff as they expand and look for larger facilities. This when the SBA 504 loan is the perfect choice for financing. SBA 504 loan size is linked to job creation . A small business owner must create and/or retain jobs OR meet a public policy or community development goal (i.e. minority, veteran or women-owned business) to qualify for an SBA 504 loan. In general, an entrepreneur can borrow $65,000 in SBA 504 loan funding for each job created and/or retained within two years.
There is no limit to the total project cost, however, a CDC can lend you up to 40% of the project cost with a dollar cap of $1,500,000 depending on the type of project. CDCs can go as high as $2,000,000 of SBA 504 financing for public policy or community development projects* and up to $4,000,000 for eligible energy conservation and manufacturing projects.
* For complete details on the types of projects that quality for public policy and community development goals, click here.
You may also wish to visit the SBA website for more information: www.sba.gov/services/financialassistance/sbaloantopics/cdc504/index.html
An SBA 504 loan is a partnership between a Certified Development Company (CDC), the Small Business Administration and a lender. CDCs are economic development organizations that have been certified by the SBA to make loans under the Certified Development Company Economic Development Loan Program through an SBA 504 loan.
Working with a lender, the CDC provides up to 40% of the financing for commercial real estate purchase and new construction with an SBA 504 loan. A lender must partner with the CDC and typically provides 50% of the financing, while the entrepreneur ends up paying as little as 10% down.
The CDC works closely with the small business borrower to process, approve, close and service the SBA 504 loan. Funding is provided by the CDC issuing a 10- or 20-year debenture bond that is sold to investors on Wall Street giving entrepreneurs access to capital at low, fixed interest rates - usually only available to large corporations. And debenture bonds are especially attractive to investors since they are backed by the SBA and fully guaranteed by the U.S. Treasury.
