SBA 504 Loan Program

Another Awesome SBA Loan Program

The SBA 504 Loan Program  was developed as tool to assist communities in their economic develop through long term financing. The SBA 504 Loan Program is designed to provide existing businesses with the ability to acquire long-term, fixed-rate financing for major fixed assets. 

Some examples of these assets are land, construction of new buildings and renovations on existing buildings.  These assets must be used to help your existing business grow.  The Business Plan and Cash Flow Projections will need to show how this loan will generate your growth expectations.   You will need to make sure you have included the time for construction to be completed.  The more information and planning you have completed the better your chances are for approval.

The SBA defines A Certified Development Company as follows:

"A Certified Development Company is a nonprofit corporation set up to contribute to the economic development of its community. CDCs work with the SBA and private-sector lenders to provide financing to small businesses.  There are about 270 CDCs nationwide, with each covering a specific geographic area."   www.sba.gov

Typically, a SBA 504 Loan  Project is broken down in the following manner:

• The first element of a SBA Loan 504 would include a loan secured with a senior lien from a private-sector lender covering up to 50 percent of the project cost

• The second element of a SBA Loan 504 would be a loan secured with a junior lien from the CDC (backed by a 100 percent SBA-guaranteed debenture) covering up to 40 percent of the cost

• The third element of a SBA Loan 504 is that the Small Business being helped will contribute a minimum of 10% of the loan in equity.

The maximum SBA Loan amount for a 504 loan is $1,500,000.  You will need to review the criteria around job creation and the information on the community development goal.  Each of these criteria are very important parts of a SBA Loan 504.   

As a general rule of thumb, the SBA is looking for a business to create or retain one job for every $50,000 provided by the SBA.  The SBA requires "Small Manufacturers" to provide a $100,000 job creation or retention goal (see below).

When you are meeting a Public Policy Goal the maximum amount of a SBA Loan 504 is raised to $2,000,000.

The public policy goals are as follows:

• Revitalization of a Business District
• Expanding your ability to increase exports outside the US
• Expanding Minority Business Development and Ownership
• The Development of Rural Communities
• Increasing your business’s productivity and competitiveness.
• Any changes or restructuring due to new federally mandated standards or policies.
• Any changes in your business due to federal budget cutbacks.
• Expansion of small business concerns owned and controlled by veterans (especially service-disabled veterans)
• Expansion of small businesses owned and controlled by women.

The maximum SBA Loan 504 amounts for "Small Manufacturers" is $4,000,000.

The SBA defines a Small Manufacturer a Small Business that has:

• The Small Business has Its primary business classified in sector 31, 32, or 33 of the North American Industrial Classification System (NAICS)

• Plus the Small Business needs to have all of its manufacturing facilities located within the United States.

In order to qualify for a $4 million 504 loan, the Small Business / Small Manufacturer must meet the following:

• Either create or retain at least 1 job per $100,000 guaranteed by the SBA of the Small Business Investment Act

• Improve the economy of the locality or achieve one or more public policy goals

Proceeds from SBA Loan 504  must be used for fixed asset projects such as:

• Purchasing land
• Making improvements to existing buildings
• Making improvements in order to modernize your business
• Adding additional parking lots
• Making improvements to the landscaping and grading of the property
• Major renovations to your existing facilities
• Making improvements to your streets
• Upgrading or improving your utlities
• Construction of completely new facilities
• Converting existing facilities into new "use" facilities
• Purchasing machinery or equipment for the long term use of the business.
• Architect and Engineer Fees
• Permits
• Surveys
• Impact Fees
• installation of Machinery
• Small Amounts of Furniture and fixtures
• Other Costs

The SBA Loan 504 Program cannot be used for the following items: 

• Cannot use the loan money for working capital

• Cannot use the loan money for inventory or inventory expansion

• Cannot use the loan money for the consolidation of Debt

• Cannot use the loan money for the repayment of existing debt.

• Cannot use the loan money for refinancing current loans

The interest rates on SBA Loan 504s are tied to the current 5 year and 10 year US Treasury Notes.  You may apply for a 10 or 20 year SBA Loan 504. 

SBA Loan 504 Fees approximately total 3% of the SBA Loan 504 amount.  This fee can be financed into the loan and this is typically done.

Collateral For SBA Loan 504s:

Collateral for a SBA Loan 504 works a little different that a SBA Loan 7(a).  Since you are using the SBA Loan 504 to enhance an asset or purchase an existing asset, you can use the project to be financed as part of the collateral for the SBA Loan 504.  Personal guaranties of the principal owners are also required.

• Your Small Business needs to be a "For Profit" business

• Your Small Business needs to fall within the size standards set by the SBA

• Your Small Business qualifies as a Small Business if it does not have a tangible net worth in excess of $8.5 million and does not have an average net income in excess of $3 million after taxes for the preceding two years.

• SBA 504 Loans cannot be used for businesses engaged in speculation or investment in rental real estate.

Our Top 9 Reasons
Why The SBA 504 Loan Program
May Be Your Answer!

• This program allows you to finance up to 90% financing on your total project costs dealing with commercial real estate acquisitions/purchases. Your ability to finance up to 90% allows you to gain significant Commercial Real Estate without putting your entire Small Business on the line.  This is significant and can allow you to keep your cash flow growing while you are building your equity within your Small Business. 

• On normal loans you will pay several fees out of your own pocket (Your Business’s Pocket) and then get a credit at closing.  This conventional method can leave your Small Business paying up to 33% in "real world" cash expenditures.  The SBA Loan 504 Program can keep these cash expenditures to 10%.  This will be a significant advantage as you grow your business and keep your cash flow growing.

• Plus you have just gained a new appreciable asset for your business with a cash outlay of 10%.  This is just smart business.

• Let’s face it.  The most important aspect of any business is CASH FLOW.  The second most important piece of success is using OPM (other people’s money) to grow your business.  So anything you can do to reduce your required monthly payments as you grow your business is a high priority.

• With the SBA 504 Loan Program, you have the possibility to gain access to below "Normal" interest rates (Fixed).  Check out the SBA 504 Loan Program now and see if it will meet your needs.

•  This SBA Loan Program allows you a longer duration to pay off your loans.  This means that your monthly payments are lower than conventional loans due to their shorter loan durations. 

• This Program also allows prepayments of your loan so you can pay your loan off early if the opportunity arises.

• This option gives you great flexibility when times are tight and also allows you to pay more off as you have more

• This is a significant advantage as it allows future property buyers to assume the property mortgages in place with the low interest rates of today.  If you think about the possibilities with this loan feature alone it can greatly benefit your business in the near future. 

• We all know that interest rates will rise and as they do if you are not positioned well in your Small Business, then your business will suffer.  This is an excellent program to lock in the current low interest rates for your Small Business.

We talked a little about this already but we wanted to make sure we drove home this point.  Ask your accountant and they should tell explain to how important cash flow is a growing business.    The following are great advantages for the SBA 504 Loan’s Program when you are putting in 10% equity for the loan.

• Getting Below "The Market Interest Rates"

• Having The Benefits Of Extending Your Payoff Period (Amortizations) instead of the traditional lending availability

• Your Ability To Acquire Commercial Real Estate and Add An Appreciable Asset To Your Business.

• Your Ability To Renovate Existing Business Property

You Could See A Reduction In Your Real Estate Expenses By As Much As 40% …..

This could be huge for your business.

•  If you are currently leasing your business space or office space then you have probably seen what we call "Leasing Creep".  This is the increase in the cost you pay for leasing your current space.  The national average for this increase in leasing business space is between 2% to 3.5%.  This means that a business could spend an additional 35% leasing costs over the next 10 years. 

• Leasing Business Space is normally the 3rd largest cost for a business.  By using a SBA 504 Loan to purchase your own business space, you are moving this large cost into a fixed cost.   This move could save you a lot of money down the road.

• Contact your account to discuss this matter in detail.

• Contact us if you want to move ahead and discuss your options with a SBA 504 Loan.

With your SBA 504 Loan, you will not have to worry about:

• Balloon Payments

• Negative Loan Covenants

• Aggressive Lenders trying to micro-manage your business.

• Committing large amounts of cash and equity to obtain your loan

• Acquiring non-assumable loans

The list goes on Contact Us Now to find out how a SBA 504 Loan will benefit your business.  You will not be disappointed.

Here are the advantages of using SBA Business Leaders:

• We are experts in Global Business Solutions and SBA Loan Procurement.
• Our experts can expedite this process and make sure your SBA Loan Packet is complete
• We understand the SBA Approved Lender Requirements and the SBA requirements
• If your Credit Score is below 700,  our Experts can assist you in getting your credit score improved.
• Our Business Solutions Experts will show you how to add additional revenues to your business.
• If you have a website, we will do a free evaluation of your Website and give you our feedback.
• Many….Many….More services we provide.
• One of the Websites we redeveloped has over 71 million competitors on Yahoo.com search results.  After our redevelopment of the site, the site is now consistently # 1 for organic search results (THIS IS HUGE FOR YOUR BUSINESS)

No other Team Can Give You The Type Of Services We Can Offer.

The Ball Is Now In Your Court.  Contact Us To Find Out How To

Add Additional Revenues To Your Current Business. 

We Will Amaze You….

GUARANTEED!!!!!!!!!

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