SBA Business Loans – Is 90% Business Financing Possible?

The International Franchise Association relates the experience of Marla and Jason Brunk with the SBA 504 Program.  The Brunks saw in the Goddard School a business they want to operate.  With Marla’s retirement funds, they were able to purchase a franchise and launched their first Goddard School in 2006. An opportunity to own the building they leased suddenly came up and they explored their financing options.  Fortunately, they found out they qualified for the SBA 504 Program with a local CDC.  This program can provide up to 90% financing for building purchase, improvement, construction and equipment through its partner banks.  The qualified business should be for profit and located within the U.S.

CDCs are the SBA-designated providers of the 504 Loan Program.  The 504 program is designed to provide qualified businesses with up to 90% financing for building acquisition, renovation, ground-up construction and long term equipment through a unique partnership with banks.  The mission of the CDC is to be a financial resource for improving the economic well-being of businesses and communities.

A conventional loan scenario would have likely required the couple to contribute at least 25%, $439,000, towards the building acquisition.  By using the 504 Program, they were able to keep over $173,000 in their business as working capital to finance future growth.  Since their school was less than two years old, they were required to contribute 15% towards the acquisition.  If their school had been open for more than two years, they would have been required to put down only 10% on the building, which would have saved them over $263,000 in working capital.  In fact, when they opened their second Goddard franchise in Manchester, Missouri, they were able to purchase the building with only 10% down!

What makes a franchisee a potential candidate for the SBA 504 Program?  There are some basic requirements that must be met. The franchisee must be looking to finance fixed assets, such as a building or long-term equipment.  It must be for-profit and located within the United States.  The franchisee, including any affiliated entities, must have a tangible net worth of less than $15 million and after-tax profits, averaged over two years, of less than $5 million. Finally, it must occupy at least 51% of the property for existing buildings and 60% for ground-up construction (and for equipment, the use must be for business operations.)

The 504 Program could be the perfect fit for your financing needs …

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