presentation by charlie cleary from self help ventures fund on 504 loans

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Self-Help Ventures Fund

SBA 504 Loan ProgramOverview August 2012

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About Self Help

• Non-profit Community Development Financial Institution founded in 1980

• Mission: Creating and protecting ownership and economic opportunity for all, especially people of color, women, rural residents and low-wealth families and communities.

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Programs

• Home loans• Small business & non-profit loans• Community development &

neighborhood revitalization • Nationwide advocacy

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504 Loan Program

US Small Business Administration

Certified Development Company (CDC)

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504 Program Goal

Foster economic development and job creation

by supporting small business growth

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How do we do that?

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Are small businesses facing challenges in accessing capital to finance facilities and equipment in today’s market?

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How do we do that?

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By partnering with traditional commercial lenders to make loans

Providing:

•Long-term financing for business expansion

•Encourage small businesses to make new capital investments

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SHVF / SBA

$800,00040%

Borrower $200,000 10%

+5% startup+5% special purpose

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504 Loan: Typical Financing Structure

FUNDINGSOURCE

PROJECTCOSTS

LIENPOSITION

LOANTERM

RATE

Commercial

Lender

50% 1st 10 Yr7 Yr (M&E)

Variable or fixed

SBA/SHVF 40% 2nd 20 Yr10 Yr (M&E)

Fixed

Borrower 10%

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What kinds of businesses use 504 loans?

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• For Profit Business

• Meets SBA definition of “small”

• Wants to limit capital contribution to fixed assets

• In a position to grow, or restructure existing borrowing

• Financing Real Estate or Durable Equipment

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Local 504 Borrowers

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Local 504 Borrowers

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Local 504 Borrowers

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Local 504 Borrowers

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Local 504 Borrowers

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Local 504 Borrowers

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Why do businesses use 504 loans?

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Appeal for Small Businesses

• Access to capital

• Up to 90% financing/Low down payment (10%)

• Long-Term, Fixed-Rate (40%) on 504 loan

• More capital to fund growth

• Finance soft-costs

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Appeal for Lending Partners

• 50% LTV, 1st lien on project assets (limited risk)

• Competitive edge: Competitive/Creative approach to attract and retain new clients

• Preserve customers and strengthen relationships

• Stronger cash flow for clients

• Participate in deals not meeting all of bank’s criteria

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Appeal for Community

• Foster Business Growth

• Job Creation and Retention

• Local Economic Stability

• Tax Base

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Contact UsDon’t Hesitate to call or email, its why we

are here

•Charlie Cleary (919) 956-4629

•Charlie.cleary@self-help.org

•www.self-help.org/504loans

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