(504 LOANS)
The 504 Loan program is an economic development program that supports American small business growth and helps communities through business expansion and job creation. The 504 loan program provides long-term, fixed- rate, subordinate mortgage financing for acquisition and/or renovation of capital assets including land, buildings and equipment. Some refinancing is also permitted. Most for-profit small businesses are eligible for this program. The types of businesses excluded from 7(a) loans (listed previously) are also excluded from the 504 loan program. The SBA’s 504 Certified Development Companies (CDC) serve their
communities by financing business expansion needs. Their professional staff works directly with borrowers to tailor a financing package that meets program guidelines and the credit capacity of the borrower’s business. CDCs work with banks and other lenders to make loans in first position
on reasonable terms, helping lenders retain growing customers and provide Community Reinvestment Act credit. The SBA 504 loan is distinguished from the SBA 7(a) loan program in these ways:
The maximum debenture, or long-term loan, is:
• $5 million for businesses that create a certain number of jobs or improve the local economy;
• $5 million for businesses that meet a specific public policy goal, including loans for aiding rural development and expansion of small businesses owned by veterans, women, and minorities; and • $5.5 million for manufacturers and
energy related public policy projects. Recent additions to the program allow $5.5 million for each project that reduces the borrower’s energy consumption by at least 10 percent; and $5.5 million for each project that generates renewable energy fuels, such as biodiesel or ethanol production. Projects eligible for up to $5.5 million under one of these two requirements do not have to meet the job creation or retention requirement, so long as the
CDC portfolio reflects an average jobs to debenture portfolio ratio of at least 1 job per $65,000.
• Eligible project costs are limited to long-term, fixed assets such as land and building (occupied by the borrower) and substantial machinery and equipment. • Most borrowers are required
to make an injection (borrower contribution) of just 10 percent which allows the business to conserve valuable operating capital. A further injection of 5 percent is needed if the business is a start-up or new (less than two years old), and a further injection of 5 percent is also required if the primary collateral will be a single- purpose building (such as a hotel). • Two-tiered project financing: A
lender finances approximately 50 percent of the project cost and receives a first lien on the project assets (but no SBA guaranty); A CDC (backed by a 100 percent SBA-guaranteed debenture) finances up to 40 percent of the project costs secured with a junior lien. The borrower provides the balance of the project costs.
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• Fixed interest rate on SBA loan. The SBA guarantees the debenture 100 percent. Debentures are sold in pools monthly to private investors. This low, fixed rate is then passed on to the borrower and establishes the basis for the loan rate.
• All project-related costs can be financed, including acquisition (land and building, land and construction of building, renovations, machinery and equipment) and soft costs, such as title insurance and appraisals. Some closing costs may be financed.
• Collateral is typically a subordinate lien on the assets financed; allows other assets to be free of liens and available to secure other needed financing. • Long-term real estate loans are up
to 20-year term, heavy equipment 10- or 20-year term and are self- amortizing.
Businesses that receive 504 loans are:
• Small — net worth under $15 million, net profit after taxes under $5 million, or meet other SBA size standards.
• Organized for-profit.
• Most types of business — retail, service, wholesale or manufacturing. For information, visit
www.sba.gov/504.
Certified Development Companies Advantage Certified Development Corporation (CDC)
11 Golden Shore, Ste. 630 Long Beach, CA 90802 562-983-7450 • 562-983-7453 Fax [email protected] AmPac TriState CDC 22365 Barton Rd., Ste. 210 Grand Terrace, CA 92313 909-915-1706 • 909-452-3140 Fax [email protected]
Bay Area Employment Development Company 1801 Oakland Blvd., Ste. 300 Walnut Creek, CA 94596 925-472-5602 • 925-926-1021 Fax [email protected] BFC - SBA Lending 1055 W. 7th St., Unit 2250 Los Angeles, CA 90017 800-722-7325 • 213-797-6722 Fax [email protected]
California Statewide Certified Development Corporation (CDC)
300 N. Lake Ave., Ste. 425 Pasadena, CA 91101
818-419-2360 • 661-752-7410 Fax [email protected]
Capital Access Group (CDC)
150 California St., Ste. 250 San Francisco, CA 94111
415-217-7600 • 415-217-7610 Fax [email protected]
CDC Small Business Finance Corporation (CDC)
2448 Historic Decatur Rd., Ste. 200 San Diego, CA 92106
619-291-3594 • 619-243-8671 Fax [email protected]
Coastal Business Finance (CDC)
930 S. Broadway, Ste. 101 Santa Maria, CA 93454
805-739-1665 • 805-739-9257 Fax
Enterprise Funding Corp. (CDC)
300 E. State St., Ste. 230 Redlands, CA 92373 909-792-3803 ext 23 • 909-792-3813 Fax [email protected] Golden State CDC 5121 Van Nuys Blvd., 3rd Fl. Van Nuys, CA 91403 818-205-1770 • 818-205-1785 Fax
Landmark Certified Development Corporation (CDC)
441 E. Whittier Blvd., Ste. C La Habra, CA 90631
562-690-6400 • 562-690-6300 Fax [email protected]
Pacific West Certified Development Corporation (CDC) 25301 Cabot Rd., Ste. 214 Laguna Hills, CA 92653 949-305-6490 • 949-305-6532 Fax [email protected] So Cal CDC 27201 Tourney Rd., Ste. 201 Valencia, CA 91355 661-584-4800 • 877-504-6622 Fax [email protected]
Southland Economic Development Corporation (CDC)
400 N. Tustin Ave., Ste. 125 Santa Ana, CA 92705
714-868-0001 • 714-868-0011 Fax [email protected]
The Mortgage Capital Development Corporation 1055 Wilshire Blvd., Ste. 1550 Los Angeles, CA 90017 213-406-8009 • 213-406-8010 Fax [email protected]
MICROLOAN PROGRAM
(LOANS UP TO $50,000)
The Microloan program provides very small loans (up to $50,000) to women, low-income, minority, veteran, and other small business owners through a network of more than 100 Intermediaries nationwide. Under this program, the SBA makes funds available to nonprofit intermediaries that, in turn, make the small loans directly to start-up and existing
businesses. Entrepreneurs work directly with the Intermediaries to receive financing, and business knowledge support. The proceeds of a microloan can be used for working capital, or the purchase of furniture, fixtures, supplies, materials, and/or equipment. Microloans
Visit us online: www.sba.gov/ca/la Los Angeles Small Business Resource —
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may not be used for the purchase of real estate. Interest rates are negotiated between the borrower and the Intermediary. The maximum term for a microloan is six years. Because funds are borrowed from the Intermediary, SBA is not involved in the business loan application or approval process. And, payments are made directly from the small business to the Intermediary. The program also provides business- based training and technical assistance to micro-borrowers and potential micro- borrowers to help them successfully start or grow their businesses. Such training and technical assistance may include general business education, assistance with business planning, industry-specific training, and other types of training support.
Entrepreneurs and small business owners interested in small amounts of business financing should contact the nearest SBA district office for information about the nearest Microloan Program Intermediary Lender or go to
www.sba.gov/microloans.
Participating Microlenders
PACE Business Development Center
1055 Wilshire Blvd., Ste. 900-B Los Angeles, CA 90017 213-353-9400 [email protected] www.pacelabdc.org Serving: Los Angeles County.
Valley Economic Development Center (VEDC) 5121 Van Nuys Blvd., 3rd Fl. Van Nuys, CA 91403 818-907-9977 [email protected] www.vedc.org
Serving: Los Angeles, Santa Barbara and Ventura counties.