Is the SBA 504 Loan Program Right for You?
As of today, the effective IR of SBA504 loan is 5.51%. Little wonder, business refinancing is leaning toward this fixed rate interest rate for financing or refinancing their commercial loan or building loan. With a twenty year term, the monthly payment on an SBA504 loan for a $1 million project might cost $5800 to $6100.
An SBA504 Loan is a two part loan from a Bank Lender, and a Local Development Center. All the components are often arranged by a commercial mortgage loan broker like Venture Funding Group of Delaware ( www.TheSBALoan.com, 1-800-578-4884 ).
Each SBA 504 loan is partnered between a certified Development Company ( CDC ), the Small enterprise Administration ( SBA ), and a lender. CDC’s are economic development setups accepted by the SBA to make loans under the the Certified Development Company Economic Development Loan Program ( otherwise know as the SBA 504 Loan Program ).
The CDC works with the small company borrower to process, approve, close, and service the SBA 504 loan. Funding is supplied by the CDC through the issuance of ten year or twenty year debenture bond that is sold to financiers on Wall Street in a once a month offering. This gives entrepreneurs access to capital at low, fixed IRs – often available only to large companies. Debenture bonds are also attractive to financiers since they’re backed by the SBA and fully assured by the U.S. Treasury.
Working with a lender, the CDC provides up to 40 percent of the financing for a commercial real-estate purchase or new construction with an SBA 504 loan. A lender must partner with the CDC and generally makes available up to half of the financing, while the entrepreneur’s contribution can be as low as ten percent.
A typical SBA-504 loan is structured like this :
~ Bank — fifty percent
~ SBA / CDC — forty percent
~ Borrower — ten percent. The borrower’s percentage will be
changed for a special purpose facility or a start up business
The SBA 504-Loan programme provides long-term, fixed rate, subordinate home loan lending and acquisition and / or reconstruction of capital assets including land, buildings and equipment.
Virtually all types of for-profit smaller businesses are eligible for the SBA504 programme. The primary benefit to an SBA 504 loan is a fixed interest rate that’s competitive and typically below market.
Under an SBA504 Loan project, many costs can be financed, including acquisition ( land and building, land and development of building, renovations, machinery and clobber ) and soft costs like title insurance, legal evaluation, environmental, bridge loan costs, and construction interest. Closing costs might be subsidized.
Partnering with a Local Development Center
A part of your commercial real-estate SBA504 Loan will be sponsored by a Regional Authorized Development Company ( C.D.C. ) chartered by the U. S. Small enterprise Administration ( SBA ). Each CDC is normally a non-profit corporation. Your mortgage loan broker will arrange the proper submission for the CDC.
The CDC will finance your small enterprise enterprise with the SBA 504-Loan, so as to provide business owners in your area a capital resource to finance real-estate and fixed assets for expansion and expansion, and job creation. Overall the CDC pools conventional lending with SBA funding to form many chances for business customers.
SBA 504 Loan Eligibility
~ The business, and all affiliate companies, must have a
tangible net worth less than $7,500,000.00
~ The average net profit of the business cannot be more than $2.5 million
dollars after taxes in the last two years
~ Job creation or retention is at a rate of 1 job for each $50,000.00 of
the SBA’s part of the loan. Exceptions my apply.
~ Must be owner occupied
~ Ability to pay back the loan from projected cash
flow and profits
~ Management capability and experience to run the company
What Businesses is a SBA504 Loan Designed For?
Somebody needing :
- A fixed interest rate, for the entire term of the SBA 504 Loan
- A long term of 10 or 20 years on real estate and 10 years on equipment
- A low interest rate as the SBA loan (debenture) is sold on the bond market and is guaranteed by the Federal government
- To preserve your capital, in most cases only 10% down will be needed
For more information on Venture Funding Group and the SBA 504 programme make contact with us at www.TheSBALoan.com or give us a call at 1-800-578-4884.
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