Larger Loans of Up To $8 Million+ Available With the SBA 504
According to the Small Business Administration, 98% of all U.S. businesses fit the definition of a small business. That seems like a big number...and it is, and it begs the question:
Should they re-name the SBA to something more appropriate like the MSBA?
Certainly, you would be hard-pressed to find someone who is unfamiliar with the acronym SBA, but most people are unaware of the various SBA programs and the role they play in helping small (and mid-sized businesses).
504 Loans
Probably the least well known SBA loan is the 504 - a loan that is specifically designed for commercial real estate financing.
The 504 loan is not well known because for the last decade there have been other loan options that were easier for banks and lenders to originate...but the 504 is going through a resurgence because not only is it available, but as a result of the Stimulus and the American Recovery and Reinvestment Act, 504 loan financing can now go as high as $8 or $9 million.
That's a lot of money and not exactly your typical mom and pop business loan
So how does the SBA determine if a business is too big for an SBA loan? Well, according to the latest guidelines for the 504 loan - it is as follows:
A business must have a tangible net worth of less than $8.5 million and net (after tax) income of under $3 million.
Surely, this includes most businesses...
There are a few caveats with the larger loans (aside from having a business that has healthy cash flow), but they are very reasonable.
Qualifying
Here are the 3 different ways a larger business can qualify:
1. You can go (a little bit) green. We say "a little bit," because the guidelines state that you must reduce your energy consumption by 10% to qualify...and 10% is a little, not a lot.
So if you can prove that in the construction or renovation of your building you can knock 10% off your energy usage than you are eligible for a larger loan. This might be a good time to start thinking about becoming more energy efficient or installing/using some type renewable energy.
2. The 2nd way you can qualify is if you are building, renovating or retooling a manufacturing facility.
A manufacturing facility can also borrow up to the maximum 504 loan amount and there is no Green requirement - although it seems logical that you would want to look into "going green" since it will:
- save you money
- help the environment
- create serious tax deductions
- possibly get you some good PR
3. The 3rd option is to have a business where you produce green or renewable energy.
Obviously, there is a large emphasis being placed on green energy with the 504 loan, but that only makes sense since we could all stand to be more conscious of our impact on the environment - and who could really be against that?
The point with all of this is that there are many mid sized and even large businesses that might be able to qualify for the SBA 504 loan and they do not realize it.
Keep in mind, there are a few other restrictions on what types of businesses can qualify, how much a business or it's owners can have in assets, etc. but by and large the 504 loan is available to most healthy businesses looking to purchase, refinance or remodel a commercial property.
John King of MyMortgageBanker.com specializes is helping the self employed and business owners obtain commercial mortgage financing with the SBA 504 loan.
