Small business owners who are tired of paying rent and have a lease renewal on the horizon, should know there’s an alternative to renting – buying their own building via a Small Business Administration loan program called SBA-504.
“Instead of writing a check to a landlord every month, business owners can be paying themselves, investing in their future,” said Kurt Chilcott, president of CDC Small Business Finance, the nation’s leader in SBA commercial real estate lending and SBA-504 loans.
The top three reasons to own a commercial building are:
- Equity – every payment made is an investment in a business owner’s future. They can leverage the accumulated wealth for further business growth or new options when the time comes to retire.
- Stabilize occupancy costs – rent increases no longer apply; the monthly payment is always the same. SBA-504 loans offer a fixed rate for 20 or 10 years.
- Preserve cash – in many cases, the monthly payment to own is less than the rent. Small business owners can use the retained working capital to buy inventory, hire new employees, purchase needed equipment or invest in other strategies to grow or improve the business.
Case in point: a California-based manufacturer recently used a $2.4 million SBA-504 loan to buy a building. His company expects to save $2,000 a month by owning the building versus renting it.
Another benefit of SBA-504 loans is saving taxes. Just like a home mortgage, interest on commercial real estate loans is tax deductible.
Small business entrepreneurs are discovering other advantages of SBA-504 financing, including the “Green” provision, which allows higher lending amounts for small business owners who want to buy or upgrade commercial/industrial buildings and make them more energy efficient. Buildings over $20 million can be financed using the SBA-504 program. Small business owners need only demonstrate a projected 10% reduction in energy costs by implementing one or more energy-saving improvements (e.g. insulation, lighting, heating/air conditioning).
SBA-504 loans are provided in partnership between certified development companies (CDCs) and banks. The loans feature a below-market, fixed interest rate for 20 years. CDC Small Business Finance works with over 70 banks and other lenders.
Thousands of small businesses in California and Arizona have purchased a building using the SBA-504 program. See some of their stories by here – Small Business Stories.
CDC Small Business Finance congratulates the 2014 recipients of the Arthur Goodman Scholarship! These outstanding students demonstrated a commitment to community involvement and desire to pursue a career in the field of economic development.
- Jamie M. Harrison – UC Santa Cruz
- Fatimata Sanogo – UC Berkeley
- Monica Sias (pictured) - UC Berkeley
- Justino Eduardo Guerrero - UC Berkeley
- Rachel Rossi - UC Berkeley
- Brittany Stearns – University of Arizona
The Arthur H. Goodman Scholarship Endowment Fund provides financial assistance to dynamic, community-minded women and minority students transitioning from a community college in California or Arizona to four-year universities.
Congratulations to the recipients!
As published on www.businesswire.com August 07, 2014 12:00 PM Eastern Daylight Time
ANAHEIM, Calif.–(BUSINESS WIRE)–So you want to start your own business and need cash. What do you do?
“We needed capital for inventory and cash flow and the Community Advantage loan provided the springboard to a successful launch of our restaurant”
Many small businesses are getting lured by alternative lenders who charge exorbitant interest rates. But there’s another, more viable option that carries a government guarantee with it. It’s called the Community Advantage loan from the Small Business Administration (SBA).
“Banks tend to be risk-averse, particularly with new small businesses that want to borrow less than $250,000,” said Stacey Sanchez, senior loan officer with CDC Small Business Finance, the national leader in Community Advantage lending. “But banks also want to be helpful and that’s when many of them will refer their clients to the Community Advantage program.”
Many small businesses struggle to find capital and are thwarted in their attempts for various reasons, including low credit scores, limited industry experience, tight cash flow or being highly leveraged.
The Community Advantage program provides small business owners with $20,000 to $250,000 for working capital, equipment, business acquisitions, start-ups and tenant improvements. At the current time, rates can be as low 6%.
“There are many small businesses with strengths that fit the Community Advantage model very well,” said Sanchez.
One such small business is Georgia’s restaurant in Orange County which recently secured an $82,000 Community Advantage loan to help launch a new eatery in The Anaheim Packing House. The restaurant specializes in Southern-style, creole-inspired comfort food in a fast-casual dining atmosphere.
“We needed capital for inventory and cash flow and the Community Advantage loan provided the springboard to a successful launch of our restaurant,” said Marlon Machado, co-owner of Georgia’s.