Downriver Community Conference

Economic Development is the process by which local people build organizations and partnerships that interconnect to provide growth in the business community, education, health, housing, and the environment.

504 SBA Loans / Metropolitan Growth and Development Corp (MGDC)

The Small Business Administration (SBA) 504 Loan Program is a partnership between the Metropolitan Growth and Development Corp (MGDC) and a commercial lender that is available to viable businesses where the financing will assist in creating or retaining jobs, exporting their products or services, and expanding ownership opportunities within Michigan.

The MGDC is a certified non profit corporation that is recognized by the SBA to assist eligible businesses to participate in the SBA 504 Loan program. We are here to help.

Investing a down payment of 20% or more can be prohibitive for most small businesses to finance expansion needs. There is another avenue. If you're a healthy business whose expansion plans call for capital investment or additional real estate, and/or equipment, you may qualify for up to 90% financing through the SBA 504 Loan Program.

The 504 Loan Program offers the following key advantages:

Enhanced Cash Flow and Low Down Payment - the entrepreneur conserves valuable operating capital and liquidity
Long Term Financing at Competitive Interest Rates - bring debt service in line with cash flow by providing longer amortized financing and no future interest rates fluctuations.

Eligibility

Eligible Uses of an SBA 504 Loan:

•    Acquisition of vacant land
•   Building construction
•   Acquisition of existing buildings
•    Major renovations and/or additions to exisiting building
•   Marine facility acquisition, including fishing vessels and commercial boats
•   Purchases of capital equipment, including heavy machinery
•   Associated costs such as title and insurance, legal fees, appraisals, environmental reports, architects fees, surveys, equipment installation, points on bridge loans, furniture and fixtures, etc.

Loan funds may NOT be used for working capital, mortgage broker fees, bridge loans during the construction period, business inventory, rolling stock (i.e. trucks) or refinancing of existing debt of the business.

Eligibility Criteria:

•   Legal entity - corporation, partnership, sole proprietor, limited liability company
•   Located in the United States
•   Net worth under $15 million and net profits under $5 million
•   Participation by another lender who finances up to 50% of project costs
•   Economic development goals must be achieved through the project financing
•   Owner-user of the project being financed must occupy at least 51% of the property for an existing building or 60% of a newly constructed building. Two or more unrelated small businesses can receive an SBA 504 loan if they combine to meet occupancy requirements.

A Small Business is Not Eligible if it is:

•   A not-for-profit (exception for sheltered workshops)
•   Engaged in lending; a passive holder of real estate and/or personal property; a life insurance company - however an insurance agency is eligible)
•   Located in a foreign country or owned by aliens who do not have legal permanent resident status
•   Has restriction on patronage
•   A government-owned entity (exception for Native American tribes)
•   Engaged in promoting religion
•   A consumer or marketing cooperative (producer cooperatives are eligible)
•   Engaged in loan packaging
•   Owned by persons of poor character
•   Equity interest by lender, CDC or associates in applicant concern
•   Provides prurient sexual material
•   In default on a federal loan
•   Engaged in political or lobbying activities
•   A speculative business

Basic Example of a 504 loan structure

Project Cost
Building purchase	$1,000,000
Renovations	170,000
Furniture	20,000
Appraisal	5,000
Closing Cost	5,000

Total	$1,200,000

SBA 504 Loan

Cash required by borrower 10%	$120,000
Bank Loan 50%	600,000
SBA 504 Loan 40%	480,000

Total	$1,200,000

Board of Directors

For more information please contact:
Lawrence Jackson
MGDC at the DCC
Phone: 734-362-3447
Email: Lawrence.jackson@dccwf.org
Link: www.sba.gov