We thank you for continuing to follow our series, “SBA Loans – A Comprehensive Guide for Somerville National Bank’s Current and Future Clients”. In the past several weeks, you have learned the basics of Small Business Loans, been provided a basic checklist for applying for a General SBA Loan: 7(a), and have learned about the basis eligibility requirements for the 7(a) SBA Loan. This week, you will learn about the SBA Loan program known as the “CDC/504 Loan”. This is an exceptionally powerful economic-based development loan that offers small businesses the ability to obtain financing while, at the same time, promoting the growth of their business and creating jobs.
504 Loans are available to small businesses through Certified Development Companies, which are often referred to as “CDCs”. According to statistics obtained from the year of 2012, well over $50 Billion in the 504 Loans ultimately led to the creation of well over 2 million jobs across the nation. Not only is a 504 Loan beneficial to the company that is approved for it, but, it is highly beneficial to the lenders, as well as the community in which the approved small business is located. A Certified Development Company is a type of non-profit organization that promotes economic-based growth within the community through these 504 SBA Loans. CDCs are both certified and heavily regulated by the Small Business Administration.
The Basic Structure of the Loan
The 504 SBA Loans that are currently offered through CDCs are structured in such a way that the Small Business Administration provides right at about 40% of the total costs associated with the project being outlined. The lender covers up to 50% of the project’s total costs, and the small business that is taking out the loan contributes at least 10% of the costs of the project. There are certain types of situations in which the borrower may be required to contribute up to 20% of the total costs associated with the project.
There are numerous benefits associated with participating in the 504 SBA Loan program. These benefits are both immediate and are also long-term. First, there is the potential to obtain up to 90% financing. The loan amortizations are longer and no balloon payments are necessary. The interest rates of these loans are fixed. Additionally, the savings that occur from the 504 Loan Program could result in a higher amount of cash profits for the small business that has the loan opened. Somerville National Bank is standing by to assist your small business in obtaining the funding that it requires to optimize economic growth in your community. We have 7 branches and all of our branches have SBA Loan professionals that are standing by to assist you in gaining the financing that you need for your small business to become the success that you envision. If you would like to get in touch with one of these professionals, simply click HERE for contact information.