Benefits & Advantages
Found that perfect building, but your lender says you need 20% or 30% down? Can't afford 20% or 30%? Plus pay for soft costs and still have enough working capital left over?
Well, Louisiana Capital CDC, Inc. (as a CDC (Certified Development Company) authorized by SBA) can help you by working in conjunction with your lender to buy that building through the SBA 504 Loan Program. Minimum 10%* down by you. All project costs can be included - land, building, renovation and soft costs. The loans are long term and provide a low fixed interest rate. The SBA 504 loan program can even finance fixed machinery and equipment and in some cases refinance existing debt.
Low down payment:
Just 10%. Lets you preserve your cash for your working capital. Most lenders will lend only 70-80% of the appraised value of the project leaving you to sink in 20-30% plus the cost of renovations plus the soft costs.
Fixed rate on the SBA 504 portion:
You don't have to worry about the prime lending rate going up. You can plan because you know the amount of your mortgage payments for the next 10, 20, or 25 years.
SBA 504 loans are for 10, 20, or 25 years. Because the CDC is in second lien position, the bank or other lender doing the 50% first lien loan is willing to lend at a longer term. Longer terms make your monthly payments lower.
Low interest rate:
Even with all the fees and closing costs included in the rate, it is still a low rate for a subordinate mortgage loan, particularly for small businesses. The blended rate between the bank's portion and the CDC's 504 portion makes the project affordable for you.
For the banker wishing to participate as the 50% lender, you get CRA credits; you lend at a lower loan to value ratio; you keep a growing customer happy; you have lower risk because the SBA 504 loan is in second position behind you. The community gets the advantage of keeping or attracting a healthy, growing small business that will be creating jobs and doing other wonderful things in the community.
*Please Note: Equity of 15-20% is required for start-ups and businesses with irregular profitability, lack of historical debt service ability, a short track record or for single purpose properties.