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Understanding 504 SBA Loans
When a business is looking for a long-term, fixed rate loan for major asset purchases, a good financing vehicle for that is the SBA 504 loan program. Proceeds from these loans must be used to purchase fixed assets such as land and improvements to buildings, streets, utilities, parking lots and landscaping. The loan can also be used to construct a new building and purchase machinery and equipment. If new equipment is bought, it has to have a useful life and for at least ten years.
The 504 SBA Loan operates as a partnership between a third party lender, a certified development company and the borrower. These types of loans offer many benefits to business owners, including low down payments, below market fixed interest rates and long-term financing.
There are several criteria for qualifying for a loan, including the fact that the business must be a for-profit company with a net worth of less than $7 million. The SBA also sets caps on the net income of the business. The business applicant has to be the primary user of a facility, with a minimum percentage of 51 percent for an existing building, and 60 percent for a new building. A new job has to be created for every $35,000 provided by a Certified Development Company. Passive investment companies, non-profit companies, lending institutions and real estate development companies are not eligible for the 504 SBA Loan.
There are three parts to an SBA 504 Loan. The first part is a mortgage provided by a commercial lender, which can take up to 50 percent of the cost. This carries its own interest rate, terms and conditions. The second part is a loan through a certified development company, which can take up to forty percent with a maximum debenture amount of $1,500,000 for most businesses, $2,000,000 when meeting defined public policy goals, and $4,000,000 for eligible small manufacturers. This term can be as long as twenty years, with ten years for equipment. The interest rate for this is fixed and usually below market. The third part of the payment comes from the borrower, at around ten percent of the total cost. If the business is new, or a new facility is being built with the loan, the borrower may have to contribute as much as twenty percent. The down payment can be cash, equity in land, a building or existing equipment.
As the SBA 504 program can only be utilized to finance fixed assets, it is not the most ideal program if a prospective buyer wants to finance the purchase of an existing business. Goodwill, working capital, and other intangible assets are typically not eligible under the 504 program. This is also a program for “new money” and it cannot be used for refinance. If someone needs to refinance or needs to do a highly leveraged loan that is short on collateral, the SBA 7a program may be a viable alternative. Get more information
Commercial Bridge Loans
What are commercial bridge loans?
Many a times a company is approved for a loan through its bank, or financial institution, but the loan doesnt close for four to six months. During this time the company can take the help of a short-term commercial bridge loans, which can be repaid when the senior loan closes. Commercial Bridge loans can help the company to meet their financial needs and remain stable.
Are you in a process of finding capital for your new business or looking for your business expansion? By now, you must have found that arranging finance for a company can be time consuming, stressful and equally frustrating. However a little bit of planning and preparation before hand will save you lots of disappointment and aggravation. Like any partnership, business which is what obtaining commercial bridge loans are, the partners want to guarantee you have researched your opinions and know what exactly you require before coming to them for commercial business loans.
There are number of ways to generate a cash flow for your business. Hence remember that not all may be right for you. Suppose you business is starting point or small you may not be eligible for a commercial bridge loan.
You can avail a commercial bridge loan for any purpose. This includes the capital for commercial property or equipment, restructuring debt or for working capital. The terms for this type of commercial bridge loan are that the loan is for 12 months or less and that there is a proposed exit strategy.
The following list can help you identify the types of information the banker will want from your end when you apply for a commercial loan.
· Three years income tax and financial statements · Year to date profit and balance sheep statement · Your Performa for the next 12 months · Length of the loan · Federal and state tax information · Personal finance statements · Your collateral sheet · Well-written business plan
Obtaining a commercial bridge loan can be a bit difficult especially when you are unaware of the correct entities that provide such funding. Today one can find numerous lenders and private investors who assist businesses with a Commercial bridge loan. You can avail funds anywhere around $1,00,000 to $10,00,000. Its all about selecting the right loan resource to meet your loan needs.
Tips that can help you help you select a right business loan lender
Commercial lenders are fussy. So just relax even if your loan gets down, simply go to the next four cheapest commercial loan lenders on the list and apply with a simple mouse click. There are lots of A paper lenders; B paper lenders and easy C paper lenders. Make sure that you are dealing with dedicated and pre-approved lenders with knowledge and decision making ability.