504 Certified Development Company Loans
- May be used for the following:
- Land or Building
- New construction or renovation of existing building
- Machinery or equipment
- Leasehold improvements and furniture fixtures
- Certain soft costs
- Limited refinancing available
- Matures in either 10 or 20 years , depending on useful life of asset being financed
- Fixed interest rate based on rate of debenture sold for the loan
- 10 year is based on 5 years U.S. Treasury rate
- 20 year is based on 10 year U.S. Treasury rate
- Project machinery and equipment – 10 year term
- Real estate – 20 year term
- Credit Criteria:
- If you are already in business: Adequate cash flow to repay debt, adequate working capital and collateral
- If you are new in business: Projective must demonstrate the ability to repay the debt and other financing
- With this loan, a CDC ( Certified Development Company ) provides long-term financing of real estate and improvements and long term equipment
- Benefits: Longer Term (10-20 years), lower down payment (usually 10%) and reasonable fixed interest rates
- Public Policy Objective of the 504 Loan – To create jobs and expand the tax base at the local level by stimulating small business investment in property, plant and equipment.
- These loans are available for fixed asset purchase and expansions. They are not available for working capital and inventory financing
- Limits:
- Maximum amount is $1,500,000 to 4,000,000 depending on project
- Minimum amount is $50,000
- If you meet their Public Policy Goals, you could be loaned up to $2,000,000
- If you meet “Green Public Policy Goals”, you could be loaned up to $4,000,000
- Some manufacturing businesses are eligible for $4,000,000
- Public Policy Goals
- Business District Revitalization: Will be located in a designated revitalization area
- Expansion of Exports: At least 10% of sales must be from exporting
- Expansion of Minority Business Development: 51% ownership by minority U.S. citizen
- Rural Development: Located in area with population less than 50,000
- Enhanced Economic Competition: Business is engaged in advancement of technology, plant retooling, conversion to Robotics or competition with imports
- Business restructuring arising from federally mandated standards or policies
- Assisting businesses affected by federal budget reductions: will be located in, or expanding in, an area impacted by federal budget reductions
- Veteran owned business: At least 51% ownership by U.S. veteran
- Women owned business: At least 51% ownership by a woman
- Reduce Energy Consumption: Will result in 10% decrease in energy usage of the small business
- Sustainable Design: Will be built according to LEED ( Leadership in Energy and Environmental Design) standards
- Renewable Energy Sources: Will be built to include energy generating equipment (solar, geothermal, wind, thermal, wave and tidal action)
