KoreaDaily Monthly Feature: The 504 Application Process
Q: What is the application procedure for the SBA 504 loan?
A: The SBA 504 program enables the small business owners to preserve their working capital by providing 90% financing for purchase/renovation/new construction of owner occupied buildings.
Before starting the application process for a 504 loan, it is suggested to review if the below list of some of eligibility requirements is satisfied:
· The building is minimum 51% owner occupied: the owner needs to occupy the building minimum 51% by size doing business.
· The business is small: the net worth is not more than $15 million and the net income is not more than $5 million.
· The business is owned at least 51% by us citizens or permanent aliens
· If the business is a start-up or the building is special purpose, additional borrower’s injection of 15% or 20% is required.
Once the above minimum eligibility requirements are reviewed, the following documents are recommended to be prepared before consulting the loan officer:
· Most recent 3 year tax returns of subject business and its related business
· Most recent 3 year tax returns of all personal guarantors (owners of 20% or more shares)
· Personal financial statement of all personal guarantors (owners of 20% or more shares)
· Business plan (if start up or business expansion is included in the project)
· Purchase contract and/or renovation/construction estimates
The above are the basic documents for review and additional documents may be requested. Once all documents are prepared, consult with a bank commercial lending officer or a SBA 504 loan officer.
Here is a success story of a business whose financing was supported by the SBA 504 program through the participation of Empire State Certified Development Corporation (Empire State CDC). Empire State CDC is a non-profit organization licensed by SBA to do SBA 504 loans.
It is a success story of a well-known yogurt company, Chobani. The below story on Chobani has been published number of times on the SBA website, www.sba.gov.
Behind the success story of Chobani, there is an entrepreneur Hamdi Ulukaya, a Turkish immigrant living in upstate New York. In 2005, Ulukaya was in the fourth year of running Euphrates Inc., a start-up feta cheese manufacturing business in Johnstown, NY. Ulukaya saw an advertisement for the sale of a Kraft Foods plant. The 80,000 square feet facility in New Berlin, NY, had aging yogurt production equipment. Ulukaya decided to buy the plant the very next day of his visit of the facility.
Ulukaya was able to purchase the plant with a SBA 504 loan through ESCDC in August 2005. He hired 5 employees from the original operation and started Chobani. Recently the company started exporting its yogurt to Australia and Canada and its yogurt had been designated as official yogurt of 2012 US Olympic Team. Today, Chobani employs nearly 3,000 people and reached $1 billion in revenue, as Fortune Magazine reported, as quickly as technology companies Google and Facebook.
As the above success story shows, the small business entrepreneurs are strongly encouraged to utilize the SBA 504 program to expand and grow their business.
Prepared by: Arami Jung, Loan officer, Empire State Certified Development Corporation