WHO WE ARE :
WHO WE ARE MANHATTAN MERCHANT SERVICES is a financial consulting firm for small business owners seeking creative financing options to expand their business. We focus on one product - the 504 loan - which we incorporate into the expansion plans of ALL of our clients in order to ensure they take advantage of the many advantages this product has to offer. With 90% loan to cost for the purchase of real estate, all construction costs, and long term equipment for your business, in addition to fixed rate financing, with an assumable product, there is simply no better loan out there for the small business owner.
Whether you are a National franchise or an independent "mom & pop", we will walk you through the entire process from start to finish making sure your loan is closed in a timely fashion.
What is the 504 Loan? :
What is the 504 Loan? The SBA 504 Loan offers Small Business Owners up to Ninety Percent (90%) financing for the purchase of real estate, ALL construction costs, and Long Term Equipment for the business.
The loan is a partnership between a Certified Development Company (CDC), the Small Business Administration and a lender. CDCs are economic development organizations that have been certified by the SBA to make loans under the Certified Development Company Economic Development Loan Program through an SBA 504 loan.
Working with a lender, the CDC provides up to 40% of the financing for commercial real estate purchase and new construction with an SBA 504 loan. A lender must partner with the CDC and typically provides 50% of the financing, while the entrepreneur ends up paying as little as 10% down.
The CDC works closely with the small business borrower to process, approve, close and service the SBA 504 loan. Funding is provided by the CDC issuing a 10- or 20-year debenture bond that is sold to investors on Wall Street giving entrepreneurs access to capital at low, fixed interest rates - usually only available to large corporations. And debenture bonds are especially attractive to investors since they are backed by the SBA and fully guaranteed by the U.S. Treasury.
There is no limit to the total project cost, however, a CDC can lend you up to 40% of the project cost with a dollar cap of $1,500,000 depending on the type of project. CDCs can exceed $1,500,000 and go as high as$2,000,000 of SBA 504 financing for public policy or community development projects* and up to $4,000,000for eligible manufacturing projects and for projects that incorporate energy saving technologies for sustainable design.
Benefits of SBA 504 Loans :
Benefits of SBA 504 Loans Great Benefits!
With SBA 504 financing, entrepreneurs can purchase commercial real estate with a down payment as low as 10%. The small business owner not only gets the tax benefits and appreciation on the real estate, but also locks in occupancy costs for the long term with financing tailored to the entrepreneur’s needs.
Enhanced Cash Flow & Low Down Payment:
With financing available for up to 90% of the project cost, SBA 504 loans offer an affordable down payment, enabling the entrepreneur to conserve working capital and retain liquidity to meet operating needs.
Long Term Financing at Competitive Interest Rates:
SBA 504 real estate financing is 20-year, fully amortized financing. This enables a small business owner to pay for a facility over the long term, avoid risky loan call provisions and enjoy lower monthly payments. For current interest rates, click on SBA 504 Interest Rates on this site.
Predictable Monthly Payments:
SBA 504 financing allows small business owners to fix their business occupancy costs with an attractive, 20-year, fixed interest rate.
Ownership Options Tailored to Meet Small Business Owner Needs:
An entrepreneur can purchase and hold title to a building personally, in the name of the business or even set up a holding company for the real estate. This gives the small business owner the flexibility to maximize tax benefits of ownership and minimize liability in the manner best suited for the entrepreneur and his company. Additionally, two or more small businesses can receive an SBA 504 loan if they combine to create a real estate holding company. For instance, this option works especially well for professionals in the medical, veterinary, legal and accounting fields.
How Financing is Structured: :
How Financing is Structured: A bank or other lender finances 50% of the project cost and takes a first mortgage (lien) position on the assets financed. The CDC, through the SBA 504 loan, finances 40% of the project cost up to a cap and takes a second mortgage position. The borrower then contributes a downpayment of as little as 10%.
Typical Project:
Cost $1,000,000
Purchase building $800,000Renovations $100,000Machinery $50,000Soft costs $50,000 (i.e. appraisal, architect fees, closing costs)Total : $1,000,000
FinancingBank - first mortgage $500,000 permanent loan (50%)SBA 504 - second mortgage $400,000 permanent loan (40%)Downpayment $100,000 (* 10%)
Total: $1,000,000
Rate & Terms :
Rate & Terms SBA 504 loans are for terms of either 10 or 20 years. The interest rate on the SBA 504 loan is set when the SBA sells the bond (debenture) to fund the loan, and the interest rate is then fixed for the duration of the term. The small business owner's monthly payment includes program fees and a loan loss subsidy fee which are financed as part of the loan. SBA 504 debentures are fully amortized securities and have no baloon payments. To compare interest rates, see the U.S. Treasury bond rates. Contact Manhattan Merchant Services to verify Current SBA 504 interest rates and historical interest rates.
Note: There is a penalty for prepayment during the first half of the loan term on an SBA 504 loan.
Collateral
The SBA takes a subordinate (second mortgage) to secure its 40% portion of the financing and takes a security interest in assets financed. Other assets of the business or principals are generally not required. (unless the company is a startup or the credit is unusually risky or the asset being financed is considered a single purpose asset or doesn't appraise high enough).
Fees and Payments
All of the fees on an SBA 504 loan are added to the loan amount so they are amortized over the loan term and do not represent any "out of pocket" expenses for the small business owner.
Payments on the SBA 504 loan are made by ACH debit from the small business owner's designated checking account on the first of each month after the loan closes. Payments on the SBA 504 loan are separate from payments on the 50% first mortgage loan.
Slide 7:
Contact Manhattan Merchant Services today to see how we can help you grow your business by implementing………
THE 504 LOAN
“AMERICA'S BEST KEPT SECRET”
Jason Gerbsman
T: 212-599-2900 F: 212-253-4117
www.the504loan.com