You’ve already utilized an SBA 504 loan to establish a successful home base for your small business. But as your business continues to grow, the question arises: can you secure another 504 loan to open another location? The answer is a resounding yes!
The SBA 504 loan program offers the flexibility for multiple loans over time, empowering entrepreneurs to fuel their expansion. Here’s everything you need to know.
How to Secure More Than One 504 Loan
Most qualified business owners can borrow up to $5 million in SBA 504 financing. Manufacturers and projects that incorporate energy efficiencies have a greater borrowing capacity.
This means you can take out several 504 loans if you do not exceed this SBA maximum.
For example, Let’s say you secured your first SBA 504 loan to buy a building for $2 million.
In this case, the bank granted you a loan of $1 million (with their own rate and terms). The SBA provided $800,000, fully amortized at a fixed, below-market rate, and you contributed a down payment of 10% ($200,000).
La 504 loan structure would look like this:
Bank 1st Loan: $1,000,000
Segundo préstamo de SBA / CDC: $800,000
Pago inicial del propietario: $200,000
Costo total del proyecto: $2,000,000
Using the scenario above, you can still receive up to $4.2 million in 504 loans from the SBA.
SBA 504 Green Energy Program & Manufacturing Related Businesses
There are two ways small business owners may exceed the SBA lending limit of $5 million:
- SBA’s Green Energy Initiative
- Manufacturing-related businesses
Manufacturers and/or projects that incorporate energy efficiency measures have a greater borrowing capacity.
For manufacturers and for ‘green’ projects, the SBA 504 portion of the financing package increases to $5.5 million per project. There is no limit on the first mortgage amount, and therefore no limit on the total project cost. In many cases, projects above $25 million can still qualify with only a 10% down payment.
If you are a manufacturer (defined as a business with its primary NAICS Code in Sectors 31, 32, and 33), or participate in the SBA 504 Green Energy Program there is no limit to the number of SBA 504 loans you can take out.
Hart Food Products
Bill and Leila Hall, co-founders of Hart Food Products, took full advantage of the 504 program, using it to finance property acquisitions and equipment purchases.
In 2009, the Hall’s secured their first SBA 504 loan to purchase a property in Paramount, CA and later secured a subsequent 504 loan for new equipment.
“Our production was maxed out, that’s how well we were doing,” explains Bill Hall. “We couldn’t grow anymore because our machinery was limited. TMC helped us buy new equipment, and that tripled our output.”
Now, Hart Food Products is sustaining its highest daily output ever.
“If you’re not taking advantage of the 504 Program, you’re missing a phenomenal opportunity. We are already looking at securing a 4th SBA 504 loan to expand to another location. The interest rates are better, the down payment is lower, and it is a better experience through and through.”
ACT Servicios Ambientales
Act Environmental Services is another example of what can be accomplished with multiple 504 loans. Business owner, Walt Singer, received his first 504 loan in 2005 and used it to buy the company headquarters in Sunnyvale, CA. At that time, the company was dedicated to transporting hazardous waste.
Since then, the company has continued to flourish. They have taken out nine more 504 loans, and the company is now an industry leader. They have expanded their services to include a full range of waste management, recycling, disposal, treatment, health, safety, and compliance needs. They have grown to 250 employees and 110 trucks, and now have 12 locations servicing the western and southwestern regions of the U.S. and Mexico.
Singer attributes a major part of his success to his SBA loans.
“Our business requires a large investment in infrastructure that just wouldn’t be feasible if we were leasing,” Singer said. “We’re in a high-growth business with a great demand for cash. If we had to come up with a much higher down payment, we’d have that much less to put into our business. Without the SBA 504 loan program, we’d be 30% less successful.”
504 Loans with TMC Financing
The ability to take out multiple 504 loans can amplify business growth. A CDC like Financiamiento TMC can help guide you throughout the entire loan process.
Founded in 1981, TMC Financing is the leading provider of SBA 504 commercial real estate loans in the nation, funding projects worth over $14 billion across Arizona, California, Nevada, and Oregon. Over 7,000 businesses have benefited from this financing, resulting in the creation of an estimated 60,000 jobs. Contact us today to learn more.
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