SBA Loan Program Good News For Small Business

As successful businesses expand, they need money to help fund that growth. This is where the SBA 504 loan program may be able to help.

Also called the Certified Development Company/504 Program, this is a long-term financing tool for economic development within a community. It provides growing businesses with long-term, fixed-rate financing for major fixed assets, such as land, buildings and machinery and equipment.

CDCs are nonprofit corporations set up to contribute to the economic development of their communities. They work with the Small Business Administration and private-sector lenders to provide financing to small businesses.

A 504 refinancing project has three components: a direct commercial loan from the private sector covering 50 percent of the project, and secured by a senior lien; a loan secured with a junior lien from the CDC covering up to 40 percent of the cost, and backed by a 100 percent SBA-guaranteed debenture; and a contribution of at least 10 percent equity from your business.

This type of SBA loan has some specific requirements that businesses have to meet in order to qualify. They have to meet job creation criteria or a community development goal, and public policy goals. The 504 Program cannot be used for working capital or inventory, consolidating or repaying debt.

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