| March 18, 2005:
“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
New or expanded businesses such as Days
Inn, Scottish Inn and Oswego Speedway in the city of Oswego; Mark’s
Service Center and Winter Harbor in the town of Hastings and Empire
Fresh-Cuts and Sunset RV Park in the town of Oswego and have all
recently benefited from a Small Business Administration (SBA) 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 expansion
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.
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 51 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;
- the minimum size of a SBA 504 loan is $50,000, while the maximum
is typically $1.5 million;
- the interest rate is fixed for the entire 10 or 20 year term
of the loan; and
- recent changes now allow a SBA 504 to be as high as $4 million
for a manufacturing project and the job requirement is $100,000
per job.
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 30 to
40 percent of the project with an SBA 504 loan, and the small business
provides 10 to 20 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.
On Wednesday, April 6, OOC, SBA and the Small
Business Development Center will host a free, two-hour seminar for
commercial realtors to gain a more detailed understanding of the
benefits and program changes associated with the SBA 504 program.
Participants will also have an opportunity to learn more about other
financing programs available through SBA and OOC, as well as the
business assistance available from the SBDC to help support economic
development projects. A continental breakfast will be provided.
If you are a commercial realtor, I encourage you call my office
at 343-1545 and reserve your seat for this important seminar.
In other economic development news:
- The Manhattan Moon in Constantia will be a
full-service, 90-seat restaurant which will replace the former
Lakeview Inn. The new owner is a graduate of the Micro-Enterprise
Training Program and will receive funding assistance from the
County of Oswego IDA; and
- Old Man’s Place will be a new 4,800 square
foot convenience store in the town of Granby which will include
gasoline pumps, propane, a laundromat and a liquor store. The
project will receive funding assistance from Fulton Savings Bank,
an SBA 504 loan through OOC and the IDA.
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