Many privately held businesses qualify for the SBA
504 program, which provides as much as 90 percent
financing at below-market fixed rates. This financing
is divided between a bank first mortgage and the
SBA second mortgage. The SBA second mortgage
is limited to a maximum of 40 percent of the project
cost, or $5.5 million.
Because there is no limit to the amount of the
first mortgage, an SBA 504 loan has the potential
to finance projects in excess of $25 million. A business can retain its much-needed working capital
by financing 90 percent of the total project cost,
which includes property acquisition as well as all
There are many business advantages for owners
who make green updates on a commercial property
using an SBA 504 loan. These range from reducing
future energy costs to maintaining working capital
with a low downpayment, and even attracting new
customers. Among the benefits:
• • Unlimited• SBA• financing. Using traditional SBA
financing, borrowers may get multiple loans, provided that the total SBA funding does not exceed
$5 million. Using the green-energy program, however, borrowers may finance as much as $5.5 million on the SBA portion of each qualifying project
with no limit on the number of projects.
• • No• limit• on• project• size. SBA 504 financing may
include the cost of a real estate purchase plus im-
provements, equipment and soft costs. Land and
new-construction projects also qualify. Although
there is no limit to the total size of the project that
can be financed, SBA 504 second-mortgage limits
apply, but when paired with a traditional bank-first
mortgage to achieve 90 percent financing, projects
at and exceeding $25 million qualify.
• • Potential•tax•savings. Qualifying green updates to
commercial buildings may offer significant tax savings. The Federal Business Energy Investment Tax
Credit remains in effect through December 2016,
allowing federal tax credits for owners of commercial buildings who make qualifying energy-saving
upgrades. The exact amount varies, but in some
cases owners could recoup as much as 85 percent
of the initial cost. In addition, some states offer rebate programs and other incentives.
• • Ongoing• utility• savings. Green improvements to
commercial real estate help save more than just
taxes. Many owners who have made green im-
provements have seen significant ongoing sav-
ings in utilities. According to the U.S. Department
of Energy, as much as 30 percent of energy used
by commercial buildings is wasted, and green im-
provements help curb this waste. Although the
SBA program requires only a 10 percent energy
reduction, the actual cash savings may be consid-
erable for many businesses. An example is a res-
taurant owner who saw a two-thirds reduction in
energy bills after installing solar panels, leading to
a total utility saving likely to surpass the cost of the
solar panels in less than two years.
• • More•attractive•to•customers. An increasing number of consumers are taking green practices into
consideration when making purchasing decisions.
Business owners who tout their properties’ green
improvements may lure new customers or hotel
guests. In addition, many businesses that take advantage of SBA’s green program also seek Leadership in Energy & Environmental Design (LEED)
certification or other energy-efficiency recognition,
such as CoolCalifornia’s Small Business Awards.
These awards and certifications may drive additional business from the increasing number of
• • Increased• resale• value. Many projects currently
appraise at the full cost of the building plus the
cost of all green improvements. When it comes
Barbara Morrison is founder and president of TMC Financing, a certified
development company (CDC) that has provided real estate financing in California and Nevada for more than 30 years. TMC offers owner-user commercial real estate buyers up to 90 percent financing utilizing the U.S. Small
Business Administration (SBA) 504 loan program. TMC ranks annually as
the largest SBA 504 lender in Northern California and Southern Nevada.
Visit tmcfinancing.com or e-mail firstname.lastname@example.org.
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