Small businesses in the metropolitan area and around the country have been able to access affordable second mortgage financing under the SBA 504 loan program since 1980. For the first time in 25 years, the program has undergone drastic changes which make it even bigger and better for businesses seeking to buy and build buildings. The 504 loan provides up to 40% of a project cost in second mortgage position.
Project cost is based on total cost- acquisition, construction, renovations, and soft costs. A bank lends 50% in first position and the small business puts in just 10%.
Until now, most small businesses were limited to $1 million on that 40%. Congress and the President recently signed off, however, on landmark legislation that dramatically increases the 504 loans.
Manufacturers can borrow 40% up to $4 million. Women owned, minority owned, veteran owned businesses, those which export and those locating in a blighted area can borrow 40% up to $2 million. All other small businesses (retail, service, professional service and wholesale) can borrow 40% up to $1.5 million.
These 504 loans are key ingredients for small business capital expansion. They are self liquidating - for 20 years - at a low fixed interest rate. Thousands of metro area small businesses have been able to buy their own homes because of the affordability of the 504 loans. Here on Long Island, companies like Tweezerman, Gold's Horseradish, Sleepy's, Lily Popcorn, and Lanco Chocolates have expanded thanks to the low cost 504 financing.