The following are probably EYE OPENING facts for many business owners:

1. SBA 504 loans (loans for owner occupied commercial real estate) are available for projects in excess of $12,000,000.*

2. To qualify for a 504 loan your business needs to have a tangible net worth of less than $8.5 million and net (after tax) income of less than $3 million.  

I don’t know about you, but I would not automatically categorize a business with a tangible net worth of $8.5 million and net income of $3 million per year as “small.” 

In fact, if you poll most people on the street and ask them what types of businesses would be eligible for a small business loan you will likely get answers ranging from lemonade stands to shoe repair shops to restaurants.  

Well, there are SBA loans for those businesses (well…maybe not lemonade stands), but there are also SBA loans for MUCH BIGGER businesses…namely the SBA 504.  

There are many reasons why the 504 is the best commercial real estate loan available at the moment, not the least of which is that the loans are available (and at low rates).

For example, as of today May 1, 2009 the interest rates for the 2 loans that make up the typical SBA 504 financing arrangement are at all time lows.  The first mortgage which is usually for 50% of the project cost and amortized over 25 years is approximately 6.5% depending on the type of property and how much you are borrowing and the second mortgage rate which is (guaranteed by the SBA) is a 20 year fixed rate at 5.25%.

Furthermore, many of the loans are eligible for 90% “loan to cost” financing.  We say “loan to cost”  because the 504 allows you to finance most of your closing costs and soft costs (appraisal, survey, engineering reports, etc.) which means for a purchase you will typically come out of pocket your down payment and some of the required up front costs but even most of those can be financed.

Bottom line, the combination of the low rates, low down payment/equity requirements and the generous loan sizes make the 504 an incredibly attractive commercial loan.

* To be eligible for maximum SBA 504 financing your business needs to be either a manufacturing facility…or you need to be able to reduce your energy consumption by 10%…or you need to produce some of your own green power. 

This means that if you go even a little bit “green” you could be eligible for a sizeable 504 loan,  and one would hope that most businesses would be capable of reducing their energy consumption by 10% without too much effort.