Find an “Forgotten” SBA program that suits another look
Much has been written on these pages in the last two years about the incomprehensible and under-utilized loan scheme called 504. loan product, i would like to rest well some of the common misconceptions about this bad credit product. Instead of wasting ink, let’s get ready to dump it. . .
Who Uses It?
504 Loans for Owners of Commercial Property. It is not a product of individual mortgage loans. 504 loan lenders must have at least one simple (or less than 51%) of the commercial area next year to qualify. The two operating companies could merge to form Eligible Passive Concern (EPC) (also known as Real Estate Holding Company, commonly known as LLC or LP), however, to take over the title of commercial property. In other words, a 504 loan should not be the owner of a single small business that buys his trading assets. It would be each doctor and accountant each using 3,000 feet in an 10,000-meter office building (6,000 feet out of 6,000 in their LLC, they would sit at 60% and qualify) for example. In addition, at least 51% of active corporate ownership (ies) and EPC must be U.S. citizens.
There are no income limits or 504 loan disbursements, but there are three levels of financial viability that differ from them: the effective company (ies’) of a real business of fair value does not exceed $ 7 million; Active corporate income (ies ’) cannot be estimated at more than $ 2.5 million over the past two years; and the uncollected liquid assets of the guarantors / principals, cannot exceed the size of the proposed project.
These three methods generally do not disqualify the average business owner, who is privately owned to a moderate degree; only a very large number stumbled upon this. In the last financial year (October 1, 2004 to September 30, 2005), approximately 8,000 business owners used 504 loans in excess of $ 11 billion in project costs representing a five-year growth rate over the previous 22% program. in the year.
Why Use It?
These loans are made up of ordinary collateral (or initial trust-deed) of 50% of the total project cost (including: existing land and building; construction / hard repair costs, furniture, buildings and equipment [FF&E]; ; and closing costs) plus a guarantee of 40% guaranteed by the government. The remaining 10 percent is borrowed money and is usually three to one-half more than what is required by traditional lenders. This low equity requirement reduces the risk for small business owners as opposed to lowering the credit risk profile of a large amount of money invested in a project such as a normal commercial loan. It also allows a small business owner to make better use of his hard-earned money, while receiving all the benefits of creating a wealth of ownership of a commercial asset offering.
Unlike most commercial bank deals, these loans are designed to cover the total cost of the project as opposed to a percentage of the estimated value or purchase price, whichever is less. The first bond (or title deed) is usually paid in full, 25 years at market level, and the second loan (or title deed) is for a period of 20 years, but at an all-time interest rate at lower market prices. The second bond (trust-deed) in 504 loans is guaranteed by the U.S. Over the past two years, the SBA bond rate has risen by almost 6 percent over a 20-year period, which is an amazing deal for any small to medium business owner and very difficult to beat. These loans not only provide better cash flow to borrowers (by borrowing at better rates and conditions), but also provide the highest repayment in the credit industry which is a financial metaphor used by real estate investors. In addition, these loans are considered when borrowers decide to sell their assets in the future, but the best strategy for many small business owners would be to sell their operating company while maintaining their EPC and checking long-term rent checks on their retirement.
Why Don’t You Know More About These Loans?
Most banks and retailers are reluctant to donate 504’s because they are primarily low loan loans (usually only the first 50% mortgage or trust 80%), which means the bank has to work harder to deliver more goods and smaller loans too. they beat the average commercial loan officer in the pocket. They can simply discuss SBA’s popular system 7 (a), which has a second-rate market (if not more well-paying (due to higher prices), where the problem of low-cost commercial loans arises. When you combine these two reasons with the fact that these 504 loans take a lot of effort and skills on the part of the borrower only, it is not surprising that this loan product has just started to catch fire in the market.