When Is the Right Time to Finance Small Business Growth?

Posted on | by Barbara Morrison

Are you planning what to do with your business’s tax refund this year? Many small businesses use that money as a down payment on expansion projects. If you’re considering growing your business through real estate expansion or equipment financing, what are some signs the time is right to expand? In this post, TMC Financing outlines some things to keep your eyes out for.

Here are some of the other things that might signal that it’s time to start planning your business growth:

  • You don’t have enough space to work in. Your business cannot thrive if it cannot function, and cramped premises can make it hard, if not impossible, to run your business. If you don’t have enough elbow room, literally or figuratively, a real estate loan makes good sense. You can construct or purchase a new building, or just buy the one you’re renting!
  • You can’t keep up with your orders. While this may be every small business owner’s dream, inability to keep up with orders can be a problem if it puts your reputation and your customers’ satisfaction on the line. If you’re finding that you need extra space or extra machinery to help you meet the need you’ve created, then it’s time to consider options to finance your growth.
  • There are products to add to your line. Every good business owner knows they need to change with their industry. If you are not offering the things your customers demand, you risk losing them to businesses that better meet their needs. Staying competitive is worth the expense of expansion.
  • You know how much money you will need and what you will do with it to grow your business. Advance financial planning is crucial to obtaining the right amount of financing on the right conditions for your particular situation. If you have a good idea of how much you will need and how you will use it, you will better be able to estimate what kind of financing is best for you.
  • You are prepared for greater success. Success requires advance planning, manpower, logistics. If you have the kinks worked out for your future work systems, and you’re organized, it will make a good impression on lenders and make sure that any pre qualification processes are as easy as possible.

If some or all of these points hold true for your business, it is a good idea to do some market research and make some predictions about your expansion. Getting in touch with a Certified Development Company (CDC) like TMC Financing and discussing how an SBA 504 loan might help you reach your goals is the next logical step.  

The majority of American businesses are eligible for a 504 loan. The main eligibility requirements are:

  • The business must be for-profit
  • The business’s tangible net worth cannot exceed $15 million
  • The business’s after-tax profit for the last two years cannot exceed $5 million

The 504 loan program partners a nonprofit (CDC) with a conventional lender (bank or credit union) to provide a loan in three parts:

  • The first is a loan from a conventional lender for at least 50% of the total project cost. You and that lender determine the amount and conditions of that loan, which becomes your first mortgage. TMC can help match the borrower with the perfect banking partner for this loan, if requested.
  • Your CDC facilitates a separate SBA loan of up to 40% of the total, up to $5 million, at a fixed, below-market rate. You can receive up to $5.5 million for manufacturing projects or projects that participate in the SBA’s Green Energy Program. This is your second mortgage.
  • Then you, the borrower, contribute 10% to the loan as down payment. Certain types of facilities are classified as single-purpose properties by the SBA and require a 15% down payment.

The 504 loan has a 10, 20, or 25-year option, and it is fully amortized (so there are no balloon payments).

A 504 loan can be used to:

The 504 loan is designed to provide flexible and affordable financing to help small businesses grow. It is an effective way to lower the cost of credit and improve loan conditions when you receive credit from a conventional lender. If you are ready to invest in growing your business and are prepped for success, this is the right time to finance small business growth through a 504 loan.

You can find out more about using a 504 loan to grow your business from one of TMC Financing’s 504 loan experts. TMC is an SBA Premier Certified Lender and a high-volume loan provider. With over 35 years of experience, TMC can help you find the financing that is best for you and guide you through the 504 loan process. Contact TMC Financing today.

Barbara Morrison
Barbara Morrison
Barbara Morrison, a local small business advocate and civic leader, founded her first company TMC Financing in 1981. TMC is a Certified Development Company that provides commercial real estate financing to small business owners via the SBA 504 Loan Program. TMC consistently ranks among the top certified development companies nationwide, and has funded projects worth more than $9 billion across California and Nevada. Nearly 5,000 small businesses have benefitted from this financing, resulting in the creation of an estimated 50,000 jobs. TMC is also the No.1 SBA 504 hotel lender in the United States. Barbara is also the founder of Working Solutions, a Bay Area microlender whose mission is to provide micro entrepreneurs, particularly low-income individuals, women and minorities, with the access to capital and resources they need to start a successful business.
Barbara Morrison
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