Small businesses looking to find affordable financing for building and equipment acquisition or construction have, for many years, been able to access the SBA 504 loan program - long term, low fixed rate second mortgages which enable the small business to put down less money. Touted as the premier small business lending program because of its benefits to small business, bank participants and the community (it operates at no cost to the taxpayer and, in fact, returns money to the US Treasury!), the 504 program just got better, thanks to recent Congressional action. The limits on the 504 second mortgage participation in a capital project have increased: - from $1 million cap on most projects to $1.5 million; - from $1.3 million on public purpose projects to $2.0 million (public purpose includes women, veteran or minority owned businesses, businesses which export, businesses located in economic development zones or other depressed areas); - from $1.0 million to $4.0 million for manufacturers.
This means that a manufacturer looking to build a building for $10 million can access low cost, long term fixed rate financing for 40% of the cost or $4.0 million! Given the price of real estate on Long Island, $10 million is not a huge number to build a manufacturing plant so there are many small businesses out there who can take advantage of this program enhancement. For those with even larger projects, combination of the SBA 504 loan with other government loan programs can effectively bring some $6 million to the table in a second mortgage position. Previously, such large projects could only access favorable funding if they qualified for IDA assistance. Says Doug Asofsky, Sr. VP Citibank and Chair of the LI Development Corporation (SBA's 504 development company for Long Island), "The higher limits on the SBA 504 loans will enable LIDC to help a whole other category of small businesses on Long Island. And it will enable us bankers to better serve our small business clients. The less money our entrepreneurs have to put down on capital projects, the more they have for their working capital needs and to hire Long Islanders."