Purchase Your Business Location with Attractive SBA Financing

You only need 10% down to buy your own business location through the CDC/504 loan program!

If you are thinking about purchasing a property for your business, now may be a good time to do it. This is especially true if you have good credit and a history of running your business profitably.  The soft commercial real estate market has created some real opportunities.  Property prices are down, some foreclosure properties are available at rock bottom bargains and interest rates are low.  Plus, the SBA loan program designed to help small businesses own their own property is having a sale for as long as the "Stimulus Funds" last and has eliminated two of their program fees making this sweet deal even more affordable. The CDC 504 Loan program provides 90% financing!

The SBA CDC/504 loan program is a long-term financing tool for economic development within a community.  It provides small businesses requiring "brick and mortar" financing with fixed rate financing to acquire major assets for expansion or modernization.  Together with a CDC (Certified Development Company), a private nonprofit corporation set up to contribute to the economic development of its community, a private SBA lender provides financing to small businesses to purchase their business location. Here is a list of CDC offices. 

Here are some of the qualifications to be eligible for the loan.

• A loan for the property is secured from a private sector lender (bank) for 50% of the project cost
• A loan for 40% is secured from a CDC, backed by a 100% SBA guarantee
• The borrower contributes 10% equity.

How the funds can be used

• Purchase land and improvements
• Construction of new facilities or modernizing, renovation or converting existing facilities
• Purchase long term machinery and equipment

Who is eligible?

• Business must be operated for profit
• Business must occupy more than 51% of the property
• Business cannot have a tangible net worth in excess of $7.5 million
• Cannot have average net income in excess of $2.5 million after taxes for prior two years
• Not for businesses engaged in speculation or investment in rental real estate

Maximum amounts

Maximum SBA debenture is $1.5 million (Generally a business must create or retain one job for every $65,000 provided, or $100,000 for manufacturing jobs). Or, $2.0 million when meeting certain public policy goals, which are spelled out on the SBA website.)

So, if you think that you may want to take advantage of this opportunity in the slow real estate market to capture and own a property for your business at favorable prices today, know that low-cost, long-term financing is available for up to 90% of the purchase price if you qualify.  You can also roll in improvements to the property if it needs a face-lift before you move your business into the building so you can husband your working capital to invest in productivity, not bricks and sticks!

Colleen Sheridan has been involved with commercial real estate for the past twenty years.  She advises small business owners about how to find, acquire, lease and live affordably in their office, retail or industrial property. Ms. Sheridan is a licensed real estate broker in Connecticut. She can be reached at colleen@mysquarefeet.com.