Tag Archives: fixed
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
A Novated Car Lease
Lots of banks and financing companies can offer a novated car lease. There are several ways to finance your car and a novated car lease may a great option for you to consider. A novated car lease is similar to a car lease and involves regular payments like a car loan against the finance and can be on a new or used car. What makes novated car lease different is that the repayments are paid by your employer and they then deduct this amount from your gross wage. The agreement for a novated car lease includes a form for your employer and yourself, to form this arrangement.
Why would an employer arrange a novated Car Lease? Employers may want to offer employees incentives that will motivate them to work better and stay committed to the company or organisation. A novated car lease is a great incentive for employees. The financial responsibilities and ownership of the car remains with with the employee and if you leave your job the responsibility of the lease is left to you the employee .
There are several advantages of a novated car lease and these include being able to pay for the car with your gross wages . In case you choose to terminate the lease or employment you could still continue to repay the loan for the car and own it.
Things to consider when taking a novated car lease
Once you have selected the car you wish to lease you may have to negotiate the price and monthly payments for it. Thereafter you need to decide on the amount of fixed payment and the term of the lease. The term of the lease can be between 12 months to about five years.You may have the option of paying the residual amount at the end of the term and buy ownership of the car. The novated car lease is a unique way for employees to pay for a car, initially with small fixed payments, and thereafter with a lump sum payment. This kind of lease is agreed upon between the employer, the employee and the financing company.
Fully Maintained Car Lease
It is crucial that you are able to meet the fixed payments for the car lease. You may want to opt for a fully maintained lease. This may increase the monthly payments but will assure you proper maintenance and care for the car.If the car is predominately for business use it may be tax deductible.
A car lease is valuable for personal as well as for commercial use. The hire purchase contract is a unique way to slowly buy equity into the car until the end of the lease when with a final payment the car can be purchased.