According to the Illinois Manufacturers Association, Illinois is the fourth largest manufacturing state in the country, with more than 18,000 companies employing over 590,000.

SomerCor is proud to support small businesses in the manufacturing sector through the SBA 504 loan and refinance programs. Here are three ways the 504 maximizes stability, capacity, and cash flow for manufacturers:

Provides Access to Ownership

The SBA 504 loan program is an economic development initiative administered by the Small Business Administration (SBA). This public-private partnership provides a long-term fixed rate lending solution for small business owners to buy, expand or refinance major fixed assets – such as land, commercial real estate, equipment, and machinery. The program requires three key players – a small business borrower, a Certified Development Company (CDC), like SomerCor, and a third party lender (i.e. bank or credit union). 

For a manufacturer looking to purchase their facility, the final loan structure typically requires the third party lender provide 50% of the financing, the CDC to provide up to 40% of the financing backed by a 100% SBA-guaranteed debenture, and the applicant puts down 10% of the financing. These borrower-friendly terms provide manufacturers a pathway to ownership and growth:

  • Low down payment – up to 90% financing for established businesses
  • Below-market interest rates – lower and more affordable monthly mortgage payments, freeing up capital reinvest in the business
  • Long-term rates 10, 20, or 25 year fixed – no surprise balloon payments

An additional benefit for manufacturers is that the maximum SBA loan amount per project (debenture) is $5.5 million as opposed to $5 million for all other industries.

Flexibility to Expand Capacity

Building ownership is just the start of the SBA 504 loan. The structure of the program allows borrowers to not only purchase commercial real estate, but to make critical updates that allow manufacturers to meet new demand. 504 loans funds can be used for:

  • Expansion, construction, and renovation of a new or existing facility – personalized for optimum efficiency, safety, and flexibility to grow
  • Heavy fixed equipment to expand capacity and streamline operations
  • Upgrades and modernizations to reduce energy use or offset that consumption through the use of renewable energy

Leverage Equity for Cash Out

For manufacturer business owners who already purchased their facility, the SBA 504 Refi is a great option to save and improve cash flow. The loan must have been incurred at least 6 months prior to 504 Refi application date and secured by eligible fixed assets for at least 6 months. In addition to conventional loans, debt subject to a federal guarantee, such as an SBA 7(a) or 504 loan, are eligible for refinance.

In addition to the lower monthly mortgage payments, fixed 20 or 25 year low interest rate, and payment predictability of the 504 loan, Refi clients can take cash out for eligible expenses. The cash out piece ranges up to 20% of the appraised value of the property. Eligible expenses for cash out funds include:

  • Salaries (non-owners)
  • Rent
  • Utilities
  • Inventory
  • Business line of credit and business credit card debts

Interested in learning more about the 504? Download the program flyer and connect with a member of SomerCor’s loan origination team today!

Margaret Griffin

EVP, Chief Lending Officer

Eric Bacon

SVP, Loan Officer

Darin Gehrke

SVP, Loan Officer

Elisabeth Williams

SVP, Loan Officer