Starting a manufacturing company takes technical knowledge, business acumen, and all around gumption. Keeping that company growing also takes determination. When the time comes to expand, your first question should be about finding financing. The Small Business Administration (SBA) 504 loan helps small businesses thrive by providing affordable access to high-quality credit through partnerships with Certified Development Companies (CDC) like TMC Financing.
How The 504 Loan Can Help Expand Your Manufacturing Company
Many manufacturing businesses are expanding now, as evidenced by growing employment in the sector. Manufacturing businesses differ tremendously in their specific offerings and skill sets, but they share similar goals for growth:
- Keeping up with automation and technology. Science has played a transformative role in industry in recent years, and this is reflected in rising manufacturing standards, improved efficiency and safer, cleaner manufacturing methods. This is why having the best available equipment is important for keeping your line of products up to date and keeping you on the leading edge of your market.
- Making sure you meet all your customers’ needs. If your products or services have really caught on, you may be struggling to keep up with demand to grow your business. Or you may be able to expand your market by offering a wider selection of products. In either case, if your production capacity is limiting your sales potential.
- Optimizing your finances. If you have commercial loans with a high interest rate or a balloon payment coming up, you can refinance your debt with a lower-interest refi loan to leave more cash for you to put toward the needs of your business.
The 504 loan is particularly well suited to help you your manufacturing company meet these goals. If you own your own facilities, you may want to expand them using a 504 loan. At some point it may be necessary to move to larger premises. If you need or want to move, you should consider the advantages of owning your workplace over renting it. The 504 loan can be used to buy land for a new workplace, to build a new workplace or to buy existing facilities.
The 504 loan is administered by a Certified Development Company (CDC) such as TMC Financing, and loans are granted in conjunction with a conventional lender that provides 50% of the total project cost. Your CDC facilitates the SBA loan for up to 40%, or $5.5 million for manufacturing projects or if the project includes energy-efficiency measures (otherwise the maximum is $5 million). The loan has a fixed, below-market rate and a term of 10, 20 or 25 years. It is fully amortized, so there are no balloon payments. You provide 10-15% of the project cost as a down payment.
TMC Financing Client Success Story
Avatar Machine is a family-owned machine shop in Fountain Valley, CA that has been providing precision machining services to the aerospace industry since 2008. The company works closely with Lockheed Martin and has produced parts for the Orion Spacecraft and NASA’s Space Launch System.
CEO Denny Nguyen had machine shop experience and received two years’ training in programming the machines, and Frank Nguyen left his job managing a phone company store in San Francisco to run the new company’s front office as general manager. Their associate Liem Do joined the company to handle the logistics.
Avatar began by doing piece work for other companies, beginning with three machines operating in a 2,500-square foot warehouse. By 2011, it had grown to six machines and had moved. In 2012, it received ISO 9100:2008 and AS9103C certification, which allowed it to work for the aerospace industry. It began to work with Lockheed Martin and, thanks to its new equipment, it was able to do processing work that it had sent out before, resulting in a significant increase in income.
Now, thanks to an SBA 504 loan and a partnership with City National Bank and TMC Financing, Avatar is operating 17 machines that will be housed in a new 20,000-square foot facility. They worked with TMC senior vice president Jennifer Davis in TMC’s Southern California office. The new building will more than double their workspace. Frank says they may hire up to five new employees once they are settled in.
The 504 loan is designed to help small businesses grow. You can find out more about it can help your business from one of TMC Financing’s 504 loan experts. TMC is an SBA Premier Certified Lender, and has funded projects worth more than $9 billion across California and Nevada, resulting in the creation of an estimated 60,000 jobs. With over 35 years of experience, TMC can help you find the financing that is best for you and guide you through the 504 loan process. Contact TMC Financing today.