SBA 504 Loans for Private Schools
Public schools are funded by taxpayer dollars, but that is not the case with private schools. However, more and more parents are interested in the better education these facilities can offer their children. With an expected $68 billion in revenue for 2018, private schools have grown almost 1% in the
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Public schools are funded by taxpayer dollars, but that is not the case with private schools. However, more and more parents are interested in the better education these facilities can offer their children. With an expected $68 billion in revenue for 2018, private schools have grown almost 1% in the last three years and employ almost 750,000 people nationwide.
Constructing a new school can be incredibly costly, but SBA 504 loans can offset those costs. These loans offer up to $5 million in funding for small businesses, and those funds can be used to purchase real estate, develop the land, construct buildings, and buy equipment needed. This makes it possible to use a 504 loan to purchase the land, construct school buildings, and invest in improvements, such as recreation areas, sports facilities, parking lots, and more.
SBA 504 loans can also be combined with other funding options, including SBA 7(a) loans, and conventional small business loans.
We’re here to help you get the commercial financing you need. Simply fill out the form below for a risk-free consultation and a free SBA loan quote!
Related Questions
What are the eligibility requirements for SBA 504 loans for private schools?
The eligibility requirements for SBA 504 loans for private schools are as follows:
- Your business must be worth $15 million or less.
- You must operate as a for-profit entity (nonprofits are not eligible).
- You must meet SBA size requirements that pertain to small businesses. Note that size requirements vary by industry, so there is no one-size-fits-all answer here. You can find the current business size requirements set forth by the SBA here.
- Your average net income for the preceding two years prior to applying for the 504 program must be $5 million or less after income taxes.
- You cannot be engaged in passive activities.
- You cannot be engaged in speculative activities.
- You must meet job creation requirements, or, alternatively, meet community development or public policy goals.
- You cannot purchase and then hold real estate. Real estate purchased with the loan must be utilized for business needs.
- You cannot be engaged in any form of lending.
- You cannot have defaulted on a federal loan previously.
- You cannot be involved in any sort of political activity or lobbying activity.
- You cannot be involved in any form of gambling, nor can you operate a casino.
- The loan must be repayable from cash flow generated by the project in question.
- You must be able to provide the SBA with personal histories for all principals in your company.
- You must have a business plan, and it must be deemed feasible.
- You must plan to occupy at least 51% of the building if it is an existing structure, and 61% of the building if it is new construction.
Note that many businesses that qualify for 7(a) financing will also qualify for 504 financing, but not all, due to the more stringent requirements.
What are the benefits of SBA 504 loans for private schools?
The SBA 504 loan program offers many benefits for private schools. These loans can provide up to $5 million in funding for small businesses, and those funds can be used to purchase real estate, develop the land, construct buildings, and buy equipment needed. This makes it possible to use a 504 loan to purchase the land, construct school buildings, and invest in improvements, such as recreation areas, sports facilities, parking lots, and more.
SBA 504 loans also have lower interest rates and lower down payment requirements than 7(a) loans and express loans, but they require a higher credit score and very strong borrower financials. Additionally, SBA 504 loans can be combined with other funding options, including SBA 7(a) loans and conventional small business loans.
What are the different types of SBA 504 loans for private schools?
The SBA 504 loan is a great option for private schools looking to finance their projects. It offers up to $5 million in funding for small businesses, and those funds can be used to purchase real estate, develop the land, construct buildings, and buy equipment needed. This makes it possible to use a 504 loan to purchase the land, construct school buildings, and invest in improvements, such as recreation areas, sports facilities, parking lots, and more.
The SBA 504 loan also offers a lower down payment, lower interest rates, and lower fees, depending on the size of the economic development project. It can also be combined with other funding options, including SBA 7(a) loans and conventional small business loans.
How do I apply for an SBA 504 loan for a private school?
To apply for an SBA 504 loan for a private school, you will need to find a Certified Development Company (CDC) that will work with you to get an SBA loan. You will then apply for the SBA 504 with a loan application form. Along with this form, you will have to provide a business plan and various financial projections that prove the strength of your business. To prove financial stability, you will also have to provide the tax returns of your business over the last 3 years. You will have to provide the same information for all owners who hold 20% or more ownership.
The great thing about the SBA 504 loan is that it is very flexible. There are many CDCs and financial institutions that are available to step into the loan with you.
To get an in-depth look at all the material that you will need to gather to prove your worthiness of this loan, look to the SBA website to get started.
What are the repayment terms for SBA 504 loans for private schools?
The repayment terms for SBA 504 loans for private schools are:
- Loan Amount: Up to $5 million ($5.5 for manufacturers)
- Loan Term: 10 to 20 years (fully amortizing)
- Rates: Prime + 1.25% - 2.75% (Fixed)
- Loan to Value: Up to 90% LTV (80% on hotels and motels)
- DSCR: Minimum 1.20x DSCR on existing cash flow
- Collateral: The SBA 504 loan uses the project assets being financed as collateral. The principal owners are also required to produce personal guarantees.
- Fees: Typically 3% of the debenture may be financed with the loan.