The US Small Business Administration Program Loan 504 or Certified Development Company is designed to provide financing for the purchase of fixed assets, which usually means real estate, buildings and machinery, below market prices. As part of its mission to promote business development, the SBA offers a number of different lending programs tailored to the specific capital needs of emerging businesses. The 504 program works by distributing loans between three parties. Business owners place a minimum of 10%, conventional lenders (usually banks) place 50%, and so-called Certified Development Company (CDC) puts the remaining 40%. The Certified Development Company was established under code 504 as a non-profit company formed to support economic growth in their area. There are several hundred CDCs across the country. The maximum amount of the loan is $ 5 million ($ 5 million to meet SBA policy targets, and $ 5.5 million for producers and some energy policy targets), and if the borrower fails, the private sector lender repays first, reducing risks for lenders and encouraging loans.
Video SBA 504 Loan
Kelayakan
To be eligible for the program, the borrower must meet the definition of SBA small business and should plan to use more than half (51%) of the property for its own operations within one year of ownership; if the building will be built new, the borrower must use 60% at once and plan to occupy 80%. The borrower can form a holding company real estate that leases 100% into the operating business, which then lowers the surplus space (up to 49%). To be eligible for this program, US citizens or permanent residents must hold the majority of the ownership of the operating company and the parent company. As of 2009, Loans 504 have no boundaries or ceilings; however, there are three criteria for eligibility:
- The company's average net income can not exceed $ 5 million after tax for the previous two years.
- The size of the anticipated project should be greater than the personal, non-retired, and unencumbered assets of the guarantor/perpetrator.
- Has no net worth of more than $ 15 million.
Maps SBA 504 Loan
Structure
There are three partners in a 504 SBA loan - a borrower, bank or other regulated lender, and the CDC. Usually borrowers should contribute 10% of the total project cost; their banks lend 50% at their own interest rates and term (over a period of at least 10 years), and have the first liens on the assets they finance; and the CDC lends 40%, with a second lien. If the financing for real estate, because most of the 504 loans, CDC loans are for twenty years with fixed interest. The full amortization rate for loan funding in August 2010 was 4.931% (the amount of change based on the rate for 5 years and 10 years of current US Treasury issues). Funds for these loans are raised through monthly auctions of bonds that are 100% guaranteed by the US Government. If financing for durable fixed appliances such as printing presses, commercial laundry equipment, manufacturing equipment etc. The loan term of 504 is 10 years.
If the borrowing company has less than two consecutive years of operating history or if the premises or assets to be financed are considered "special purposes" (eg, gas stations or some medical clinics), the borrower should increase their contribution by 5% to a total of 15% , and the CDC lends 5% less for a total of 35% - in cases where borrowers meet both conditions, they must increase by 20%, and CDC lends 30%.
The total project cost may include costs for land and buildings or existing equipment; hard construction/renovation; equipment and supplies; certain furniture; professional fees including environmental assessment and investigation; soft costs; and cover costs. Project costs can usually be financed as a whole with a 504 loan, whereas most commercial bank loans only finance a percentage of the valued purchase price and the borrower must incur closing costs and soft costs. If the borrower then decides to sell their property, 504 loans are assumed.
Recipient
- Agro Farma, a manufacturer of the Chobani yoghurt brand, is using a 504 SBA loan to buy former yoghurt factory used now as its main factory.
References
External links
- CDC/504 loan program on SBA
- Small Business Administration Website
Source of the article : Wikipedia
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