Is your small business planning to purchase additional commercial real estate? ‘Going Green’, not only benefits the environment, but it may also allow your company to qualify for additional SBA 504 financing under the SBA’s Green Loan Program for your expansion project.
Requirements for Qualification
There are three expansion project types that qualify for the SBA’s 504 Green Loan Program and to be eligible your company must meet the specifications of one of the three pre-authorized plans. The first project type applies to businesses that plan to use existing buildings and requires your business to occupy over 51% of the property within the first year of acquiring the property. The second qualifying project type is applicable to businesses whose expansion projects entail constructing a new facility. For this situation, businesses are needed to occupy 60% of the space at the start of the project and should increase occupancy to 80% within 10 years. The last project plan that meets the loan program’s guidelines allows business owners to set up a real estate holding company that leases 100% of the property to an operating company. The operating company may also sublet extra space to another business as long as the third business occupies less than 49% of the property. If your business is planning to expand and one of these situations is relevant, exploring this option may be very beneficial.
Using Your SBA 504 Green Loan
Business owners may qualify for 2nd SBA 504 mortgages up to $5.5 million for each green project initiative. If your business qualifies for this program you may use the funding for the following green initiatives:
- Energy Reduction: Your project must be a new facility replacing an existing facility or updating an existing building to reduce energy consumption by at least 10%.
- Renewable Energy: Your business’s expansion project must update the facility and all equipment to use a renewable energy source such as solar and wind or utilize a renewable fuel producer such as biodiesel. Qualifying projects require a minimum of 15% of the facility’s energy to be renewable.
504 Green Loan Program Benefits
Qualifying businesses may receive the following as part of the Green Loan Program:
- Up to 90% of financing with a fixed interest rate
- Up to $5.5 million per project, but no more than $16.5 million
- $125,000 – $20 million or more for total projects
- Choice of 10-, 20- or 25-year amortization terms
- Financing of associated fees and costs (architectural costs, closing costs, etc.)
The SBA’s 504 Green Loan Program positively affects both the economy and the environment. Speak to a 504 Capital team member to learn more about how your business can qualify for this program.