| Aug. 22, 2007: “Spotlight
on Our Economy” Monthly Column for The
Palladium-Times
By L. Michael Treadwell, CEcD, Executive Director of Operation
Oswego County
Funding Available to Start or Expand Your Business
New or expanded businesses such as River House Restaurant in Pulaski,
Oley’s East, a convenience store in Oswego, The Club at Caughdenoy
Creek, a golf complex in the town of Hastings, and The Reservoir
Inn and Reservoir Gas & Mart in the town of Redfield 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 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 $1.3 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.
If you’d like more information about the SBA 504 loan program
or other economic development services in Oswego County, call my
office at 343-1545 or visit our website at www.oswegocounty.org.
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