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SBA 504 Benefits

Need to grow: Recently, we worked with a manufacturer whose space was too small – limiting their production. The SBA 504 financed the purchase of their new, larger building and overnight, their capacity increased. Because the 504 only required 10% equity into the building purchase, the company was able to buy new raw materials for their increased production capacity – letting them grow immediately!

Work together: Two smaller, unrelated (operating) companies were tired of paying high rents. They worked together, formed a joint real estate holding company to purchase their new property. Both borrowers stated that without us making them aware that this was even possible, the purchase may have never happened. Their mortgage expense is actually lower than their rent expense!

Repeat borrower: when a daycare borrower purchased their second location, they utilized the SBA 504 to buy the building. When the opportunity to expand to a third location came about, they thought of using the 504 once again. Given the rapid growth, equity injection (cash into the project) was tight and remaining Working Capital had to be adequate. Through great communication and understanding between the borrower and us, the third-location is now open, doing well and has a good Working Capital position!

Lease or buy: a borrower had the first right of refusal to buy the property they had leased for 8 years. Since it was a large acquisition cost (appx. $10 Million), the borrower felt defeated, knowing they would not be able to come up with the 20% conventional equity injection (cash into project). When they learned of the SBA 504, they began saving up their 10% required equity. When discussions began with the borrower, we uncovered that over $800,000 of improvements were made into the property over a 2 year period. Instead of putting their saved capital into the purchase of the property – the improvements counted toward the required equity. The borrower kept over $750,000 on their Balance Sheet and used the funds to continue their growth!

Additional SBA 504 Resources:

Top Tips for a Successful SBA Loan Application

Business Loan Checklist

Top 3 Misconceptions About SBA Loans

Should Your Business Buy or Lease Its Building?

Why Now is the Time to Refinance Real Estate

Seedcopa’s Top 3 Tips for Small Businesses (Plus Q&A!)

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