SBA 504 Loan Program
Small Business Administration (SBA) 504 Loan program is noticeable Certified Development Company programs nowadays. Main intention of this program is introduction of better avenues by facilitating required monetary support for buying fixed assets like real estates and machinery at below the prevalent market prices.
Business development is main focus of these loans. There is diversity in such loan programs and they fulfil capital needs to help businesses leap manifold.
Most Certified Development Companies get established under the 504 Code. They are non-profit corporations and the main purpose of their set up is to working like a pivotal force for complete economic growth in specified local areas where much attention is to be given. Maximum loan amount that can be availed shouldn’t cross $1 million. Even 1.3 million can be offered in the special cases. There are specified rules on which SBA 504 Loan programs function. Loan is distributed amongst three parties including business owner having 10%, lenders putting up to 50% and the rest 40% is put by Certified Development Companies.
Borrowers must occupy at least 51% of a particular property for a minimum time period of one year of ownership to qualify for SBA 504 Loan programs. Similarly those having formed some holding company and or are having at least two operating companies are also eligible to apply in such loan programs. Possession of commercial property is mandatory for availing such loans.
Though there is no ceiling or restriction in 504 Loan programs but there are three crucial aspects which plays determinant role for eligibility criteria. The first criteria is average net income of borrowing group hasn’t crossed to $3 million in previous two years, project size for which loan is sought should be bigger than the personal projects and details of unencumbered liquid assets of guarantors or principles should be declared clearly. Last but not the least net worth of operating company must have reached to nearly $8.5 million.
SBA 504 Loan programs are given due importance for their excellent formats. As 50 percent mortgage of total project cost is already assured by borrowers risks lessen completely in the repayment and chances of growth is vibrant. Major costs incurred in this loan program is cost of land or existing building, construction or renovation costs, fixture of equipments, arranging furniture sets and miscellaneous costs.
As government-guaranteed bonds are submitted in such loan programs for 40% of the total funds security and risk aspect is already strengthened. Most important benefits though are that crucial project costs are financed in BSA 504 Loan programs. Their mortgage terms can be 25 years at market rates for the first and for the second mortgage it is decided for a 20 year term period.
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