Business Loans for Veterans: How the SBA Supports Our Troops Through the 504 Loan

sba 504 loans for veteran business ownersSupporting business owners who are veterans of the U.S. military is one of the main priorities of the Small Business Administration (SBA), and the 504 loan explicitly supports the expansion of small businesses owned and managed by veterans as a public policy goal. Certified Development Companies (CDCs), the nonprofit organizations set up to administer the 504 loan program, have the option of participating in the Vet Loan Advantage for 504 loans—a rebate on some of the loan fees—and the Community Advantage Loan, which provides small loans. TMC Financing offers veterans both of these programs.

A Look at Some of TMC Financing’s Veteran Clients

TMC Financing is proud to have many veterans among its clients, like Bear Label Machine. Kirk and Ellie Schliger are the husband and wife team who have owned and operated the company for over 25 years. The family run company sells handmade, customized computer-controlled machines that place labels on cans at high speed—up to 1,250 cans per minute. The Schligers obtained a 504 loan to purchase the 8,900 square foot building in Gold River, CA they were operating in. Kirk was able to take advantage of TMC’s Vet Loan Advantage Program and received a 3,000 cash rebate.

“The loan is a great help to us,” Kirk and Ellie’s son and Bear Label’s General Manager David Engellenner said. “Being able to secure a permanent home for our business was very important to us. We can now concentrate on running and expanding the company and not worry about the cost of rent always going up or if we are going to be forced to relocate at the end of a lease.”

Foam Distributors is another family business whose owners are both U.S. Navy veterans. They purchased the Hayward, CA property they had been leasing for $5 million with a 504 loan from TMC. The project included a 4,685 square foot office building and a 72,624 square foot commercial building. The company employed 80 people at the time and expected to add five more jobs.

Foam Distributors was established in 1977 and has a reputation for excellence in creating custom-made cushion packaging. Its services include design and testing of polyurethane, polystyrene and polyethylene foams. The business creates custom packaging for the Silicon Valley computer industry. They also make intricate cases for communications and medical equipment and to cushion automotive parts. The company is working to become more environmentally friendly. They use a JIT (just-in-time) production model and have begun stocking foams in multiple densities that are made with 40-60% pre-consumer recycled content.

The Grand Prix Car Wash & Auto Detail Center in Palm Desert, CA is owned by Harry and Sue Fox. Harry, a Vietnam Era veteran, established the business with his wife in 2003. They operate a full-service car wash with a convenience store and gift shop and are proud to offer the absolute best detailing, polishing, and carpet steam cleaning for individuals and small business fleets.

They added additional employees and applied for their second loan in 2016. Their newly-renovated Express Drive-Thru Service washes a car in 3-5 minutes and includes free vacuums. Other services they offer include seat shampooing, engine cleaning and high-speed buffing.

Financing for Veterans from $50,000 to +$5 Million

The 504 loan is a great option for veteran-owned businesses. It features a low down payment, a long term, below market fixed rate, with no additional collateral required. A 504 loan can be used to:

  • purchase land or buildings
  • construct buildings
  • purchase equipment with a service life of ten years or more
  • improve, upgrade or renovate commercial buildings
  • refinance existing non SBA debt

The 504 loan is granted in conjunction with a conventional lender. The lender provides 50% or more of the project total and receives the first lien position. The CDC facilitates the SBA loan for up to 40%, or $5 million ($5.5 million if the project includes energy-efficiency measures or is a manufacturing project), at a fixed, below-market rate over a 10- or 20-year term with no balloon payment. The borrower provides 10-15% of the project cost as a down payment.

  • 50%: Conventional Lender
  • 40%: CDC
  • 10% Borrower

Under its Vet Loan Advantage program, TMC gives veterans who own 51% or more of their businesses a cash rebate of $3,000 at the time their loans are funded.

In addition to the 504 loan, TMC offers veterans the Community Advantage Loan, a type of SBA 7(a) loan with a streamlined application process. This loan, unlike the 504, can be used for working capital and inventory, as well as real estate, equipment, debt refinancing and start-up capital. The loans are provided by conventional lenders in sizes from $50,000 to $250,000. The SBA guarantees 85% of loans up to $150,000 and 75% of loans larger than that amount.

These are the conditions of the Community Advantage Loan:

Terms
  • usually 10 years
  • up to 25 years for real estate
  • no penalty for early repayment of loans for less than 15 years
  • fully amortized
Rate
  • variable
  • prime + 2.75-6%, based on risk
Fees
  • loan fee of $1,000 on loans up to $100,000, 1% on loans greater than $100,000
  • SBA guarantee fee of 2-3% on guaranteed portion of loans over $150,000
Collateral
  • security interest in business assets
  • unconditional personal guarantees of principal owners of 20% or more
  • unconditional guarantee of business concern
  • lien on personal residence, if available

TMC Financing shares the SBA’s dedication to the veterans of our country’s military. We can offer veterans SBA financing in amounts from $50,000 to $5.5 million (the largest project TMC has been involved in topped $40 million).

TMC Financing is a Premier Certified Lender with the SBA. Since 1981, we have helped over 5,000 businesses finance projects worth over $9 billion. If you would like to learn more about TMC’s programs for veterans, contact one of TMC’s loan experts 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