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Business Financing: SBA 504 Loan Could Provide the Green for Your Green Business

The U.S. Small Business Administration offers a loan program for businesses that could just be the green ticket for environmentally sensitive businesses. The SBA 504 Loan Program provides up to 90% financing for acquisition or renovation of owner occupied real estate, or the acquisition of qualifying pieces of equipment. With SBA loan amounts up to $5.5 million, it means a project size can be $11.0 million, or even higher for qualifying businesses and their projects.

So whether it is a new building fully encompassing the newest qualifying green technology or the renovation of an existing building to take advantage of going green, the SBA 504 loan program may be the program for you and your business.

The SBA 504 loan program is a zero subsidy program to the government and on occasions has created a surplus which of course gets used elsewhere by the U.S. Government. Being a zero subsidy program is amazing, especially when put in the context of the fact that these loans are provided to borrowers at rates that are typically below rates that financial institutions charge and tend to be to businesses that these institutions consider a much higher risk. The March 2011, 20-year, full-term, effective rate for the 504 loan program was as low as 5.941% for the SBA’s loan. Banks won’t typically offer rates this low, and certainly won’t offer them for 20 years fixed.

The financial institutions that participate in the SBA’s loan programs are truly a catch 22 for businesses that need the SBA funding. On the one hand, you can’t get direct funding from the SBA in most cases without the participation of these lenders, but many of them, despite the decreased risk due to the SBA’s participation, are not putting money on the streets at rates that can really make the difference in getting our job machine revved up. Most lenders won’t likely tell you about the SBA 504 loan program because it’s not really in their best interest, but that’s another blog topic; however, you can contact me at http://www.thecrescentgroupx.comto discuss in more detail.

While most large businesses are cutting jobs left and right, its businesses with less than 500 employees that are adding jobs. According to a March 30, 2011 article in the Orange County Register entitled “Small private employers lead big job growth in March”, ADP, which has 550,000 employees it manages payroll for, added 184,000 small business employees (for businesses with less than 500 employees) versus only 17,000 in its larger business segment for March 2011. Because small business job growth is so critical to our long-term economic recovery, the SBA and its 504 loan program are a key component to helping fuel job creation for small businesses in the United States, especially green businesses.

If you would like to learn more about the SBA 504 loan program, or if you need someone to help you make your business more successful, Mr. Dilworth, a former corporate banker, 504 loan underwriter, and CFO would be happy to discuss your business needs with you. If you are interested in help with your business, please email Mr. Dilworth at The Crescent Group X, thecrescentgroupx@gmail.com, or visit the company website (http://www.thecrescentgroupx.com) for more information.

Business Financing: SBA Financing – Don’t Throw the Baby Out with the Bath Water

By partnering with financial institutions to finance these businesses, when these institutions alone would not even touch them, the SBA helps to create the jobs that we need to expand our businesses, thus serving to create wealth from both a business and individual perspective. One of the primary loan programs the SBA runs is a zero subsidy program to the government and on occasions has created a surplus which of course gets used elsewhere. This is amazing, especially when put in the context of the fact that these loans are at rates that typically are below rates that financial institutions charge and tend to be to businesses that these institutions consider a much higher risk. The March 2011 20 year full term effective rate for this program was as low as 5.941% for the SBA’s loan, so go see if a bank will give you a fixed rate loan that low and for that long. My guess is that it won’t happen.

The financial institutions that participate in the SBA’s loan programs are truly a catch 22 for businesses that need the SBA funding. On the one hand, you can’t get direct funding from the SBA in most cases without the participation of these lenders, but many of them, despite the decreased risk due to the SBA’s participation, are not putting money on the streets at rates that can really make the difference in getting our job machine revved up.

While most large businesses are cutting jobs left and right, its businesses with less than 500 employees that are adding jobs. According to a March 30, 2011 article in the Orange County Register entitled “Small private employers lead big job growth in March”, ADP, which has 550,000 employees it manages payroll for, added 184,000 small business employees (for businesses with less than 500 employees) versus only 17,000 in its larger business segment for March 2011. Because small business job growth is so critical, without lenders participating in the process to a much higher degree, the money will not be available to continue fueling new job creation in the near and not so distant future. Because lender participation is spotty at best, the SBA should consider a new provision to either directly, or through conduits such as Certified Development Companies or other such lenders, lend directly to businesses needing funds for equipment, real estate, etc., thus getting the flow of money going back out on the street in a way that is not a hand out, but rather a way that helps create jobs and ultimately business and personal wealth.

The cutbacks that are being proposed, while significant, should still allow the SBA to assist a large number of businesses while maintaining strong lender oversight.  The SBA as a whole; however, should not be cut back too much further (other than possibly at some of the administrative levels) than what is already being considered since this could serve to undermine the good it does and that would be like throwing the proverbial baby out with the bathwater, thus further hurting our chances of coming out of this nagging recession.