The U.S. Small Business Administration (SBA) was created in 1953 as an independent agency of the federal government to aid, counsel, assist and protect the interests of small business concerns, to preserve free competitive enterprise and to maintain and strengthen the overall economy of our nation. The SBA helps Americans start, build and grow businesses. The SBA offers a variety of loan programs to eligible small business who cannot borrow on reasonable terms from conventional lenders in the amount needed without government help. Most of the SBA's business loans are made by private lenders (check with your local bank), and then guaranteed by the SBA.
The 504 loan program is a long-term financing tool for economic development within a community. The 504 Program provides growing businesses with long-term, fixed-rate financing for major fixed assets, such as land and buildings. A Certified Development Company is a nonprofit corporation set up to contribute to the economic development of its community. CDCs work with the SBA and private-sector lenders to provide financing to small businesses.
Typically, a 504 project includes a loan secured with a senior lien from a private-sector lender covering up to 50 percent of the project cost, a loan secured with a junior lien from the CDC (backed by a 100 percent SBA-guaranteed debenture) covering up to 40 percent of the cost, and a contribution of at least 10 percent equity from the small business being helped.
The SBA 504 Debenture Loan Program allows the business owner to purchase or construct an industrial or commercial building while preserving working capital. Financing is below market interest rates with only a 10 percent down payment or equity injection. The loan proceeds may be used to purchase or remodel an existing building or to construct a new facility. Contact the SBA or other listed non-profits for further information on their financial programs.