Keep in mind that the 504 loan is specifically designed to … Longer loan amortizations, no balloon payments; Savings that result in improved cash flow for small businesses. Substantially all (85%) of the proceeds of the original debt being refinanced must have been used for 504 eligible purposes (acquisitions, construction or improvement of long-term fixed assets) and the remaining (15% or less) must have been incurred for the benefit of the small business; The debt to be refinanced must be secured by eligible fixed assets; The project also may include using available equity to pay eligible business expenses; The small business must have been in operation for two years or more (no start-ups); and. The 504 Loan program offers small businesses both immediate and long-term benefits, so business owners can focus on growing their business. Some of the top-level benefits include: To be eligible for a 504 Loan, your business must be operated for profit and fall within the size standards set by the SBA. Note Loan funds may not be used for working capital, mortgage broker fees, bridge loans during the construction period, business inventory, rolling stock (i.e. Loans cannot be made to businesses engaged in nonprofit, passive or speculative activities. Not sure where to start? Details of this time-limited program include:  504 Loan provides fixed-rate, long-term financing for up to 20 years. The 504 Loan Program provides approved small businesses with long-term, fixed-rate financing used to acquire fixed assets for expansion or modernization. 504 loans are made available through Certified Development Companies (CDCs), SBA's community based partners for providing 504 Loans. Together, they encourage banks and other lenders to help small businesses and entrepreneurs start and grow their … Due to changes made to the Small Business Jobs Act in the fall of 2011, small business owners now have a new loan refinancing option.  Changes were approved to the Small Business Jobs and Credit Act, allowing small business owners to use 504 Loans to refinance up to 90% of the appraised value of available collateral (existing commercial mortgages). SBA 504 Loan Program. The 504 Loan Program is an SBA business loan program authorized under Title V of the Small Business Investment Act of 1958, 15 U.S.C. The SBA -backed portion of the 504 loan will be a second mortgage, financing up to 40 percent of eligible project costs. An SBA 504 loan is a low down-payment, fixed interest rate, long-term loan to provide financing for fixed assets such as land, buildings, machinery, and equipment. Supplemental Information for PCLP Processing, Coronavirus (COVID-19): Relief options and Additional Resources, U.S. Small Business Administration | 409 3rd St, SW. Washington DC 20416. About the U.S. Small Business … The SBA explains it this way: “The SBA 504 loan program is a powerful economic development loan program that offers small businesses another avenue for business financing, while promoting business growth, and job creation … The 504 loan program provides small businesses with long-term, fixed-rate financing used to acquire fixed assets for expansion or modernization. The refinancing of debt in connection with an expansion of the business through new or renovated facilities or equipment*. A Certified Development Company (CDC) is a nonprofit corporation that promotes economic development within its community through 504 Loans. SBA 504 Loan Requirements for Borrowers, Projects, Lenders, and More While they are not as stringent as some other types of loans, you will find a wide range of eligibility requirements when it comes to the 504 loan program. Temporary 504 Loan Refinancing Program â Small Business Jobs Act. Community Development Resources is a Community Development Company (CDC) and has an active SBA 504 Loan Guaranty program for existing … Coronavirus (COVID-19): Relief options and Additional Resources, U.S. Small Business Administration | 409 3rd St, SW. Washington DC 20416.  As of February 15, 2012, the $50 Billion in 504 loans has created over 2 million jobs. This program is a proven success and win-win-win for the small business, the community and participating lenders. 2) A loan secured with a junior lien from a CDC (like us at BFC) covering up to 40 percent of the cost, and backed by a 100 percent SBA-guaranteed debenture. The 504 loan consists of a conventional first mortgage, typically for 50 percent of the project cost, from a third-party lender.  Â, There are over 260 CDCs nationwide each having a defined Area of Operations covering a specific geographic area. As Karen Mills, SBA Administrator commented, âThe economic downturn of recent years and the declining value of real estate have had a significant, negative impact on many small businesses with mortgages maturing within the next few years. As a result, even small businesses that are performing well and making their payments on time could face foreclosure because of the difficulties they face in refinancing and restructuring their mortgage debt. This temporary program is another tool SBA can provide to help these small businesses remain viable and protect jobs.â, This program is authorized to provide $7.5 billion in financing and is available until September 27, 2012. A CDC is a nonprofit corporation whose mission is to contribute to the economic development of its community. Black Hills Community Economic Development operates as a Certified Development … Under the 504 Program, a business qualifies if it has a tangible net worth not more than $15 million, and an average net income of $5 million or less after federal income taxes for the preceding two years prior to application. For additional information on eligibility criteria and loan application requirements, please contact your local Certified Development Company (CDC).   The area of operation for most CDCs is the state in which they are incorporated. Modernizing or upgrading facilities to meet health, safety, and environmental requirements; **Contact your CDC or local SBA District office for additional details. This program is a proven success and win-win-win for the small business, the community … Development, Inc., Rapid City, SD. This fact sheet highlights the SBA’s Certified Development Company/504 Loan Program (504 loan program). While there is no maximum project size, the maximum SBA loan amount (debenture) is $5 million. Small manufacturers or specific types of energy projects (as described in the energy project section) may qualify for a $5.5 million debenture. A Certified Development … The SBA 504 guaranteed loan program to purchase commercial real estate is comprised of two loans. Improving, diversifying or stabilizing the local economy; Assisting manufacturing firms (North American Industry Classification System (NAICS), Sectors 31 to 33) and all of its production facilities located in the United States; or. The SBA 504 Loan program is a powerful economic development loan program that offers small businesses another avenue for business financing, while promoting business growth, and job creation. The SBA 504 loan program focuses on providing financing that leads to community development. The purchase of land and land improvements, including grading, street improvements, utilities, parking lots and landscaping; The construction of new facilities or modernizing, renovating or converting existing facilities; The purchase of long-term machinery* ; or. SBA 504 loans qualify for community development consideration (depending upon the size of the loan as explained below) because the loans promote economic development and create and retain jobs. Personal guaranties from owners of 20% or more are also required. Obtaining CRA Credits with SBA 504 Loans In general, loans that don’t fall under the “conventional small business lending” category may be considered as community development loans. Community Advantage loans, which are set to expire in 2022, are a lending program established by the SBA to help encourage lending in traditionally underserved communities. The SBA 504 Loan has three components: 1) Direct commercial loan from the private sector covering 50 percent of the project, and secured by a senior lien.  An example of how a typical 504 loan is structured follows: Total 504 projects costs for a $1,000,000 project may include the following (eligibility requirements apply to the 504 portion of the project as well as the participating lending portion): The use of proceeds from 504 Loans must be used for fixed assets (and certain soft costs), including: *Note: The 504 Program cannot be used for working capital or inventory, consolidating or repaying debt, or refinancing (except for projects with an expansion component or that meet the temporary refinancing provisions of the Small Business Jobs Act of 2010). See also âProgram Updatesâ at the bottom of the web page. Start your business in 10 steps. This progr The U.S. Small Business Administration 's SBA 504 Loan or Certified Development Company program is designed to provide financing for the purchase of fixed assets, which usually means real estate, … Learn more here. For additional information on eligibility criteria and loan application requirements, small business and lenders are encouraged to contact a Certified Development Company in their area.  As this program is time-limited, itâs important to act now if you are looking to refinance! Â. The remaining 10 percent will be your small business owner contribution. • borrowers to finance environmental cleanup or redevelopment of an industrial site as part of an effort to revitalize the LMI community in which the property is located. The SBA 504 Loan program is a direct SBA lending program designed to provide long-term, below-market, fixed asset financing to small, for-profit businesses. This program and the 7(a) Loan Program are two of the SBA’s flagship efforts to expand access to capital. Private sector lenders, CDCs, and the SBA … Assisting businesses in Labor Surplus Areas; Revitalizing a business district of a community with a written revitalization or redevelopment plan; Expanding small businesses owned and controlled by women; Expanding small businesses owned and controlled by veterans (especially service-disabled veterans); Increasing productivity and competitiveness (retooling, robotics, modernization, competition with imports); Assisting businesses in or moving to areas affected by Federal budget reductions, including base closings, either because of the loss of Federal contracts or the reduction in revenues in the area due to a decreased Federal presence; or; Reduction of rates of unemployment in Labor Surplus Areas determined by the Secretary of Labor; or. For questions about the 504 Loan Program, please contact your local SBA District office. 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