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Qualifying for a small business loan

On Behalf of | Apr 16, 2015 | Commercial Real Estate |

Some small companies in Ohio may be able to qualify for Certified Development Company/504 loans from the U.S. Small Business Administration as long as they meet certain requirements. This type of debt financing may be used to expand or improve a company’s operations through the purchase of real estate other than rental properties, equipment or another approved business asset.

To qualify for a CDC/504 loan, the SBA requires businesses to operate as for-profit companies and is doing business in the United States. Though a small business owner must be able to show that they will have the ability to repay the loan using their company’s projected cash flow, the business owner must also be able to demonstrate that the company has had an average annual net income after taxes of less than $5 million for the past two years.

In addition to the cap on net income, the SBA requires a company to have a tangible net worth of less than $15 million in order to qualify for a CDC/504 loan. Further, the company must be unable to secure funding from any other source. If the SBA determines that company owners have the resources to finance the business personally, the owners will be required to use their own finances in lieu of all of a portion of the loan proceeds that are being requested.

Another one of the requirements for a CDC/504 loan is that the applicant has good character. To determine whether a business owner has good character, the SBA looks at the personal history of the applicant to see if they are likely to repay the debts that they acquire. To improve the chances of obtaining this type of financing, a small business owner might want to seek the assistance of an attorney during the preparation of an application.


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