504 Loans: Helping Businesses Expand, Refinance and Prosper
The 504 Loan Program is ideal for small businesses because it partners with community banks to bring much needed funding for growth and refinancing. The program provides low interest business financing and long-term, secure rates. The flexible lending requirements and strong financial partnership allows businesses to grow, refinance and preserve working capital.
Financing typically is structured as follows:
50% from a private sector participant (usually a bank)
40% from SomerCor
10% from the business
Benefits of 504 Loans:
Smaller businesses gain access to previously inaccessible public capital market and secure long term, fixed rate financing for expansion projects.
The low 10% down payment helps businesses preserve working capital for continued growth.
The interest rate on SomerCor’s portion is an attractive 20-year fixed rate.
Businesses can finance all project related furniture, fixtures and equipment, plus many soft costs, such as appraisals, title searches, and architectural fees.
The term of SomerCor’s loan more closely matches the life of the assets being acquired or improved.
The 504 loan is fully assumable. If, during the life of the loan, you decide to sell the project property, SomerCor’s portion of the loan can stay with the property, as long as the buyer qualifies under program guidelines.
504 Loans: Supporting the Banking Community
504 Loans are designed to support banks by reducing their exposure and helping to expand their client base. Here’s how banks benefit:
The private sector lender can more competitively position its own market terms and rates on 504 loan projects.
The SomerCor loan is subordinated to the bank, giving the bank a first lien on all assets, with only a 50% loan to value.
Banks can build relationships with a wide pool of businesses wanting to expand and refinance.