Pub. 14 2017 Issue 1

O V E R A C E N T U R Y : B U I L D I N G B E T T E R B A N K S - H E L P I N G N E W M E X I C O R E A L I Z E D R E A M S Issue 1 • 2017 19 Is SBA 504 Financing Right for Your Small Business? W hat i s t he SBA 504 L oan Program? The SBA 504 assists small business owners in the purchase of commercial real estate or machinery/equipment and is a partnership program between a Certified Development Company (CDC) and a lender. Partnering with a qualified lender, a CDC can provide up to 90% financing for commercial property purchases and new construction and typically does not require additional collateral. What does the 504 Loan Program Offer? An SBA 504 Loan is a powerful tool to help your business grow: • Low Down Payment – 10% in most cases which allows busi- nesses to conserve working capital; • Competitive, Fixed-Interest Rate – no future interest rate fluc- tuations; • Long-Term – typically 10 or 20-year terms; • Improve Collateral Position - increase borrowing capacity at lower rates; • Debt Refinancing Available - refinancing of existing debt avail- able if expanding. Who can qualify? To be eligible for the SBA 504 Loan Program, a businessmust op- erate for-profit and qualify as a small business. What is considered “small”? The SBA defines a small business as a for-profit entity that has a net worth less than $15million or and their net profit after tax does not exceed $5 million (2-year average). What can 504 dollars be used for? The SBA 504 funds can be used for land, acquisition of an exist- ing building, new construction, fixed assets from a business acqui- sition, building expansion/renovation, long-termequipment (must have useful life for at least 10 years), professional fees, and debt re- finance for expansion (debt refinance must not exceed 50% of the new expansion costs). Funds cannot be used for working capital, inventory, fran- chise fees, tenant improvements, or goodwill assets from a business acquisition. By Lorena Chavez, Sr. Business Development Officer – New Mexico Capital CDC How is the loan structured? The typical SBA 504 loan is structured as a 50/40/10, with the borrower injecting 10%, as displayed below: In other cases, the borrower will have to inject 15% if the busi- ness is a start-up and has less than 2 years in operation, or is a special-purpose property. If the borrower is both a start-up and a special-purpose property, the injection increases to 20%.  With 20 years experience, Lorena is equipped to the knowledge and tools to to help with the purchase of commercial real estate and equipment for small businesses. She can be reached at (505) 250-072 or LorenaChavez@CapitalCDC.com .