At Lakeshore 504, we can help you find the resources you need to finance your growth. The SBA 504 loan program, administered by Lakeshore 504, provides healthy, small and medium-sized businesses with long-term fixed rate financing for the acquisition or construction of fixed assets. Projects are financed through a unique public/private partnership that involves private lenders financing 50% of the cost, Lakeshore 504 covering 40% of project costs, and the small business investing at least 10% of the project costs.

Financing Available: Up to $1,500,000 ($2,000,000 in certain situations) per company or 40% of project costs (whichever is less).

Use of Loan Proceeds:

• Purchase land, purchase or construct building.
• Modernize, renovate, or improve building.
  
• Purchase machinery and equipment with 10 year useful life.
  
• Soft costs.
  
• Minimum total project size $150,000.
  
• No maximum total project.
  
• Job creation: one per $50,000 in 504 funds or meeting other economic development goals.
  
• Maximum 504 loan size $1,500,000, or $2,000,000 under the following public policy goals: business district revitalization, exporting, minority enterprise, rural development, modernization, adverse impact of Federal fund reductions, upgrading for health, safety, or environmental purposes.

Term of Loan: SBA portion: 10 or 20 years based upon economic life of assets. Private Lender: at least 10 years on real estate and at least 7 years on equipment and leasehold improvements.

Rate of Interest: Approximately 1 - 1 1/2% above 5 and 10 year Treasury Note, respectively, on the SBA portion. Private Sector Lender--first mortgage to be made at market rate determined by private lender without SBA restriction.

Downpayment: At minimum 10%. Start-up businesses require a 15% downpayment. (Special purpose buildings -- add an additional 5%).

Typical Structure:

The Process: SBA authorization 19-21 days after lender commitment. Lakeshore 504 works directly with SBA and facilitates approval.

Collateral: Generally a lien on all fixed assets purchased with loan proceeds. First mortgage--private lender. Second mortgage -- SBA.

Guarantees: It may be requested that life insurance, equivalent to the amount of the debenture, be taken on the key borrower, especially in the case of a sole proprietorship. Personal guarantees are required on all individuals with 20% or greater ownership.

Eligible Businesses: Operating, for profit businesses.

Ineligible Businesses:

• Passive income companies
  
• Real estate companies
  
• Developers/Landlords
  
• Financial institutions
  
• Unregulated media firms
  
• Not-for-profit businesses

Job Creation Criteria: $50,000 of SBA 504 funds per one job either created or retained.

Fees: One-time costs amounting to approximately 3%-4% of the SBA portion (can be capitalized as part of the loan). Closing costs of $2,500 are also incorporated into the loan. The borrower is, however, responsible for any out-of-pocket costs, which typically run between $500 and $900.