Jobs Is The Key To SBA 504 Loans

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The Small Business Administration's 504 loan program has been around for nearly 30 years, and it can now be used to refinance your existing commercial real estate while it also funds your expansion.

The 504 program allows you to borrow up to 90 percent of your cost to build, buy or expand a commercial real estate building. The funds can also be used for capital equipment, furnishings, fixtures and fees incidental to the transaction. Examples of suitable real estate include owner-occupied, commercial condominiums, offices, warehouses, franchises, restaurants, car washes, bowling alleys and skating rinks. Investor-owned properties do not qualify.

But the reason for its existence is not to create commercial real estate. Its real reason for existence is job creation.

Traditionally, "for every $50,000 guaranteed by the SBA, (the borrowers) must be able to demonstrate that they are creating or retaining at least one job," says Karen Mills, SBA's administrator.

Right now, as part of the federal stimulus initiative, job creation has temporarily been relaxed to one job per $65,000.

The program is administered by about 270 certified development companies in a partnership with the commercial lenders and the SBA.

As with most new programs, the dibbuk is in the details. Accordingly, lenders and CDCs will be poring over SBA's procedural notice to understand the critical essentials.

Meanwhile, stay in touch with your banker, NADCO and its members for up-to-date information as the refinancing enhancement unfolds. See nadco.org for NADCO members and more about 504.

For more information, see the SBA website.