What Is A CDC?

A Certified Development Company (CDC) is a nonprofit corporation that promotes economic development within its community through 504 Loans. CDCs are certified and regulated by the United States Small Business Association (SBA). The SBA and its participating lenders (typically banks), provide financing to small businesses through the CDC in order to spur economic development.

There are over 260 CDCs nationwide. The area of operation for most CDCs is the state in which they are incorporated. The Business Initiative Corporation of New York (BICNY) is one of the CDCs assisting businesses located in New York State.

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What Is A 504 Loan?

The BICNY/SBA 504 Loan Program is a powerful economic development loan program that offers small businesses another avenue for financing, while promoting business growth and job creation. As of February 15, 2012, $50 Billion in 504 Loans created over 2 million jobs. The 504 Loan Program is a proven success for the small business community and its participating lenders.

The 504 Loan Program provides small businesses with long-term, fixed-rate financing used to purchase commercial property or machinery that can be used for expansion or modernization of your current business. These loans are made available through BICNY, SBA’s community-based partner for providing 504 Loans.

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504 Loan Eligibility

Thank you for your interest in applying for a BICNY/SBA 504 Loan, a powerful financing tool for small business owners. To determine your business' eligibility, please complete this form.

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504 Loan Benefits

The 504 Loan program offers small businesses both immediate and long-term benefits, so that you can focus on growing your business. Some of the top-level benefits include:

  • We can provide up to 90% financing
  • At below-market interest rates
  • Your mortgage recording tax will be waived (the fee is typically 2.8%)
  • Our loan amortizations are longer and do not have balloon payments
  • We can close loans as early as 90 days

504 Loan benefits represent significant savings and improved cash flow for small businesses.

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504 Loan Successes

Business Initiative Corporation has closed on loans amounting to $51 million with partner banks having contributed $68 million. The overall economic impact of our loan program has lead to $143 million in growth for our community. Our loan Portfolio saved 415 jobs and created 1,413 for a total economic impact of 1,828 jobs.

Our success stories are part of what makes us so special!

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504 Loan Use

Your 504 Loans must be used for fixed assets (and certain soft costs), including:

  • The purchase of existing buildings
  • The purchase of land and land improvements, including grading, street improvements, utilities, parking lots and landscaping
  • The construction of new facilities or modernizing, renovating or converting existing facilities
  • The purchase of long-term machinery

Note: The 504 Loan Program cannot be used for working capital or inventory, consolidating or repaying debt, or refinancing (except for projects with an expansion component or that meet the temporary refinancing provisions of the Small Business Jobs Act of 2010).

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504 Loan Structure

BICNY/SBA will usually provide 40% of the total project costs, a participating lender will typically cover up to 50% of the total project costs and the borrower will provide 10% of the project costs. Under certain circumstances, a borrower may be required to contribute up to 20% of the total project costs.

An example of how a typical 504 Loan is structured follows.

A 504 Loan for a $1,000,000 project may include the following (eligibility requirements apply to the 504 portion of the project as well as the participating lending portion):

  • Building Purchase
  • Land
  • Renovation
  • Furniture & Equipment
  • Soft Costs

TOTAL: $1,000,000

Loan Structure

$500,000: 1st lien with bank (loan obtained from a private sector lender covering up to 50% of total project cost)

$400,000: 2nd lien with 504 Loan, 20 year, fixed rate (loan obtained through BICNY, funded through an SBA-guaranteed debenture, covering up to 40% of total project cost)

$100,000: Borrower contribution (at least 10% of total project cost)

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504 Loan Specifics

Maximum Loan Amount (Debenture)

While there is no maximum project size, the maximum BICNY/SBA loan amount (debenture) is $5 million. Small manufacturers or specific types of energy projects (as described in the energy project section) may qualify for a $5.5 million debenture.** Generally, a business must create or retain one job for every $65,000 guaranteed by BICNY/SBA. Small manufacturers must create or retain a ratio of one job for every $100,000.

As an alternative to job creation or retention, your business may qualify if it meets a community development or public policy goal as long as BICNY maintains its portfolio job average requirements. These include:

Community Development Goals

  • Improving, diversifying or stabilizing the local economy
  • Stimulating other business development
  • Bringing new income into the community
  • Assisting manufacturing firms (North American Industry Classification System (NAICS), Sectors 31 to 33) and all of its production facilities located in the United States
  • Assisting businesses in Labor Surplus Areas

Public Policy Goals

  • Revitalizing a business district of a community with a written revitalization or redevelopment plan
  • Expanding exports
  • Expanding small businesses owned and controlled by women
  • Expanding small businesses owned and controlled by veterans (especially service-disabled veterans)
  • Expanding minority business development
  • Aiding rural development
  • Increasing productivity and competitiveness (retooling, robotics, modernization, competition with imports)

Modernizing or Upgrading Facilities to Meet Health, Safety and Environmental Requirements

  • Assisting businesses in or moving to areas affected by Federal budget reductions, including base closings, either because of the loss of Federal contracts or the reduction in revenues in the area due to a decreased Federal presence
  • Reduction of rates of unemployment in Labor Surplus Areas determined by the Secretary of Labor
  • Reduction of energy consumption by at least 10 percent
  • Increased use of sustainable design, including designate that reduce the use of greenhouse gas emitting fossil fuels, or low-impact design to produce buildings that reduce the use of non-renewable resources and minimize environmental impact
  • Plan, equipment and process upgrades or renewable energy sources such as the small-scale production of energy for individual buildings or communities consumption, commonly known as micropower, or renewable fuels producers including biodiesel and ethanol producers

**Contact the Business Initiative Corporation of New York for additional details.

Collateral

Generally, the project assets being financed are used as collateral. Personal guaranties from owners of 20% or more are also required.

Interest Rates and Fees

Interest rates on 504 Loans are correlated with the current market rate for 5-year and 10-year U.S. Treasury issues. Loan maturities of 10 and 20 years are available. Fees may be financed with the loan.

The 504 Loan Program provides fixed-rate, long-term financing for up to 20 years.

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