Sometimes I get a question that awakens a sleeping giant – a great SBA loan program few lenders know about. That’s the case here. Read on!

Q: Hi Richard. Our local economic development group has asked our CDC to help them structure a financing proposal for a manufacturing firm that is considering putting a new plant in our community. The project means a lot to all us locals: Good paying jobs, an expanded tax base, and expansion of local ancillary businesses.  The firm is going to rehab a building that is currently empty and buy new machinery. They’ll need some working capital. It’s a big investment. Can you help us structure an attractive financing package?

A: Thanks for asking. The most fun part of lending is putting together a financing proposal that works. And the most rewarding part of 504 lending is making our communities better. That’s why CDCs were established, and why 504 lending is different from other SBA loan programs.

The best kept secret. We’ve talked a lot lately about 504 Green Loans. Yet a little-known secret is the 504 Small Manufacturing Loan program. Most lenders outside the CDC world don’t know it exists. But when they hear about it, they get excited. It’s more attractive than a normal 504 loan. And surprise! It’s even more attractive than a Green 504 loan!!

What about eligibility? It’s really very simple. If the business borrower’s NAICS begins with 31, 32 or 33, SBA considers the company a manufacturer. And if the company meets the size standards, it’s eligible for a Small Manufacturer 504 Loan.

The best news. How much the business already has in SBA loans at the time of application doesn’t matter. Under the 504 Small Manufacturer program, the amount of those loans doesn’t count against the business’ ability to borrow more. The amount of any single Small Manufacturer 504 Loan is limited to $5.5 million, just like a 504 Green loan.

But here’s the best part: Unlike 504 Green Loans, there is no limit to the number or amount of 504 Small Manufacturer loans a business can have. (SOP 50 10 5 (K) Subpart C. Chapter 7, I. A. 2. pgs. 355-356)

The upshot. So to answer your question, the business could have a Small Manufacturer 504 Loan of up to $5.5 million for the building rehab, and another one for $5.5 million for equipment even if it currently has 7(a) or 504 loans outstanding. A pretty financing package indeed!

At JRB, we’re in the business of helping build the capacity of lenders nationally so they can offer their clients best financing available. Keep your questions coming. We’d love to assist you in putting a financing package that works for you – and your community.

Richard Jeffrey
Associate, CDC/504 Programs