Sept. 17, 2004: “Spotlight on Our
Economy” Monthly Column for The
Palladium-Times
By L. Michael Treadwell, CEcD, Executive Director of Operation
Oswego County
Start or Expand Your Small Business
with SBA 504 Loan
If you need help getting your new or expanded
business off the ground, you may want to consider a Small
Business Administration 504 loan administered by Operation Oswego
County (OOC), Oswego County’s designated economic development
agency.
The SBA 504 loan program is designed to promote
economic development growth and job creation in small businesses
and make the overall financing structure for a new business or project
more attractive and affordable. The program offers accessible, fixed
rate, long term financing for land, buildings and equipment. Businesses
eligible for SBA 504 loans are independently-owned, for-profit businesses
that are ready to expand and create jobs.
Businesses such as Jake’s Automotive
of Oswego, Cheap Seats Bar and Grille and Gioia & Associates
in the city of Oswego, Linda’s Top of the Hill Diner in the
city of Fulton, DeWald Roofing Company, Mark’s Service Center
and Winter Harbor in the town of Hastings, Empire Fresh-Cuts and
Sunset RV Park in the town of Oswego have all benefited from the
SBA 504 program in recent months.
The following are some of the key points
to know about the SBA 504 loan program:
- for every $50,000 of the SBA 504 loan,
the project must create at least one new job;
- machinery and equipment financed must
have a useful life of at least 10 years;
- for construction of a new building, the
small business borrower must plan to occupy at least two-thirds
of the space;
- for purchase or remodeling of an existing
facility, the small business borrower must plan to occupy at least
50 percent of the space;
- the borrower must qualify as a small business.
According to the SBA, about 98 percent of all U.S. companies meet
the agency's definition of a small business; and
- the minimum size of a SBA 504 loan is
$25,000, while the maximum is typically $1.3 million. The interest
rate is fixed for the entire 10 or 20 year term of the loan.
Businesses must have a net worth less than
$6 million and annual after-tax profit of less than $2 million.
A Certified Development Company (CDC) such as OOC, finances 40 percent
of the project with an SBA 504 loan, and the small business provides
ten percent equity. A normal SBA 504 loan is structured where the
bank finances 50 percent of the project at its normal rates and
terms. The SBA 504 loan is guaranteed 100 percent by the U.S. Small
Business Administration. As with any traditional loan, the loans
must be collateralized. With the SBA 504 program, the bank takes
the first lien position on all collateral. The CDC takes a second
behind the bank. This gives the bank a 50 percent loan to value
from the moment the loan closes and this position improves with
each loan payment from the small business borrower.
In other economic development news, EJ Spirtas
Group of St. Louis, MO purchased the former International Paper
facility located on Mitchell St. in Oswego. The company plans to
redevelop and market the lake-front property which includes 55 acres
with 164,000 square feet of warehouse space, a 16,000-square foot
office building, and a 450,000-square foot, two-story manufacturing
facility.
Also, Northeast Biofuels, LLC will acquire
a 90-acre subdivision of Riverview Business Park in Volney for a
100-million-gallon-per-year ethanol production facility. The $148
million project will include retrofitting approximately 300,000
square feet of the existing building and the construction of two
grain silos and one cooling tower. The project will create 51 jobs.
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