Posts tagged SBA 504 Job Creation Requirements
Can I Use an SBA 504 Loan for an Online Business?

The Internet has revolutionized almost every industry. There are very few segments of the economy that have not been affected at least somewhat by the advent of the Internet, and many segments have seen the rise of “online only” businesses. Of course, this is something of a misnomer. The businesses not truly online only. All businesses have a physical presence somewhere, even if there is no way for customers to walk into a brick and mortar storefront. So, when it comes time for your online business to purchase real estate or heavy equipment, an SBA 504 loan could be a great way to fund your purchase.

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Can I Use an SBA 504 Loan to Invest in Real Estate?

In contrast to other business loans, including other SBA loans, the SBA 504 loan program is specifically geared to help small businesses purchase real estate of all types. This could be an existing building, or it could be empty land and funds for construction of the property. This focus naturally makes you wonder if it is possible to use a 504 loan to invest in real estate. The short answer here is that, no, it is not possible. However, there are certain exceptions that you should know about.

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Can You Use an SBA 504 Loan to Finance Business Vehicle Purchases?

While most business loans can be used for anything your company might need, that’s not the case with the SBA 504 loan. It is strictly to be used for real estate-related needs, or for the purchase of heavy equipment. That eliminates the purchase of vehicles, even if you intend to purchase fleet vehicles for your business. There are some exceptions to this rule, but only when the vehicles being purchased qualify as heavy equipment.

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Are There Prepayment Penalties with an SBA 504 Loan?

Consumers have received greater protection against prepayment penalties on mortgage loans in the past few years. However, the same protections do not extend to small business owners. The simple answer to the question of whether or not there are prepayment penalties with an SBA 504 loan is yes, there are. However, it’s not actually quite so clear cut.

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Can Franchises Benefit from an SBA 504 Loan?

It may seem like franchises would not be a good fit for an SBA loan, but that is actually not the case. Many franchises can qualify for an SBA loan, primarily 7(a) and 504/CDC loans. With that being said, not all franchises will qualify.

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Can a Non-Citizen Apply for an SBA 504 Loan?

The answer to the question posed above is both; “it depends.” While non-citizens can apply for an SBA 504 loan, as well as for other SBA loan options, it is not a clear-cut, straightforward situation. In short, only some non-citizens are eligible to take out an SBA-backed business loan.

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How Can I Improve My Business Credit for an SBA 504 Loan Application?

As we’ve mentioned elsewhere on this site, you should have a credit score of 680 or higher if you want to apply for a 504 loan. That can be challenging for small businesses. Thankfully, there are ways that you can improve your credit and make your business a better funding candidate while reducing the level of risk for lenders.

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What is the Required Debt Service Coverage Ratio (DSCR) for SBA 504 Loans?

In order get approved for an SBA 504 loan, you must prove your company’s ability to repay it. A business plan and the necessary financial documents play a role in that. However, most underwriters will use a debt service coverage ratio, or DSCR, as a major element in their decision-making process.

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How Is the SBA 504 Loan Structured?

It’s important to realize the difference between a 504 loan and many other types of loans. For instance, with a home loan, your funds go specifically towards the purchase of the house and land on which it sits. It may also be used to pay some associated costs, and there are loan options that will allow you to finance needed repairs and renovations into the project, too. In contrast, 504 loans are structured differently— and, in this article, we’ll discuss how.

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What Is a Certified Development Company and Why Are They Involved in 504 Loans?

According to the SBA, “A Certified Development Company (CDC) is a nonprofit organization that promotes economic development within its community through 504 loans. CDCs are certified and regulated by the SBA, and work with SBA and participating lenders (typically banks) to provide financing to small businesses, which in turn accomplishes the goal of community economic development.”

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What are the Job Creation Requirements of the SBA 504 Loan Program?

504 loans exist to help small businesses grow and expand. However, they are not available to all companies. In order to qualify, you must meet specific requirements. In general, this means that you need to create a specific number of jobs based on the amount of the loan. However, that’s not always the case. In this article, we’ll discuss what borrowers need to know about the job creation, public policy, and community development requirements for the SBA 504 loan program.

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