Motoring Loans Blog ? Why Should I Use the SBA 504 Loan Program?

As of today, the effective IR of SBA504 loan is 5.51%. Small wonder, business refinancing is leaning toward this fixed rate rate of interest for financing or refinancing their commercial mortgage or building loan. With a twenty year term, the regular payment on an SBA504 loan for a $1 million project might cost $5800 to $6100.

An SBA504 Loan is a 2 part loan from a Bank Lender, and a Local Development Center. All the parts are often organized by a business loan broker such as Venture Funding Group of Delaware ( www.TheSBALoan.com, 1-800-578-4884 ).

Each SBA 504 loan is partnered between an authorized Development Company ( CDC ), the Small company Administration ( SBA ), and a bank. CDC?s are industrial 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 Programme ).

The CDC works with the small business borrower to process, approve, close, and service the SBA 504 loan. Funding is supplied by the CDC through the issue of 10-year or 20-year debenture bond that?s sold to financiers on The Street in a once per month offering. This gives entrepreneurs access to capital at low, fixed interest rates ? usually available only to giant corporations. Debenture bonds are also attractive to investors since they?re backed by the SBA and totally guaranteed by the U.S. Treasury.

Working with a bank, the CDC makes available up to 40 percent of the financing for a commercial real estate purchase or new construction with an SBA 504 loan. A bank must partner with the CDC and often supplies up to 50% 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 ? 40 percent
~ Borrower ? ten percent. The borrower?s p.c. will be
changed for a special purpose facility or a start up business

The SBA 504-Loan programme provides long-term, fixed rate, subordinate mortgage financing and purchase and / or restoration of capital assets including land, buildings and hardware.

Just about all sorts of for-profit smaller businesses are eligible for the SBA504 programme. The key benefit to an SBA 504 loan is a fixed interest rate that?s competitive and usually below market.

Under an SBA504 Loan project, many costs can be backed, including purchase ( land and building, land and construction of building, restorations, machinery and equipment ) and soft costs like title insurance, legal evaluation, environmental, bridge loan charges, and construction interest. Closing costs may be sponsored.

Partnering with a Local Development Center
Some of your commercial property SBA504 Loan will be sponsored by a Regional Certified Development Company ( C.D.C. ) chartered by the U. S. Small enterprise Administration ( SBA ). Each CDC is in general a non-profit corporation. Your mortgage loan broker will prepare the appropriate submission for the CDC.

The CDC will finance your small enterprise enterprise with the SBA 504-Loan, in order to provide entrepreneurs in your region a capital resource to finance property and fixed assets for growth and enlargement, and job creation. Overall the CDC pools traditional lending with SBA funding to create many possibilities for business clients.

SBA 504 Loan Suitability
~ The business, plus all affiliate corporations, must have a
discernible net worth less than $7,500,000.00
~ The average net profit of the business can?t be more than $2.5 million
dollars after taxes in the last two years
~ Job creation or retention is at a rate of one 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 money
flow and profits
~ Management ability and experience to run the company

What Businesses is a SBA504 Loan Designed For?
Someone desiring :

• A fixed interest rate, for the entire term of the SBA 504 Loan
• To preserve your capital, in most cases only 10% down will be needed
• 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

For more in-depth info on Venture Funding Group and the SBA 504 programme contact us at www.TheSBALoan.com or give us a call at 1-800-578-4884.
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Source: http://blog.motoring-loans.co.uk/why-should-i-use-the-sba-504-loan-program/

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