Northern Hills Community Development Corporation (NHCD) is a Small Business Administration 504 Certified Development Company. The 504 Certified Development Company (CDC) Program enables growing businesses to secure long-term, fixed rate financing for major fixed assets, such as land and buildings. A certified development company is a non-profit corporation set up to contribute to the economic development of it's community or region. CDC's work with the Small Business Administration (SBA) and private-sector lenders to provide financing to small businesses. There are about 290 CDC's nationwide.
The program is designed to enable small businesses to create and retain jobs. To ensure that this is the case, the each loan in the CDC's portfolio must create or retain one job for every $35,000 of debenture proceeds provided by the SBA.
Typically, a 504 project includes---
a loan secured with a senior lien from a private-sector lender covering up to 50% of the project cost
a second loan secured with a junior lien from the CDC (a 100% SBA-guaranteed debenture) covering up to 40% of the project cost, and
a contribution of at least 10% equity by the borrower.
The maximum SBA debenture generally is $750,000 (up to $1 million in some cases).
Use of proceeds
Proceeds from 504 loans must be used for fixed-asset
projects such as:
purchasing land and improvements, including existing buildings, grading, street improvements, utilities, parking lots and landscaping;
construction of new facilities, or modernizing, renovating or converting existing facilities; and
purchasing machinery and equipment.
The 504 Program cannot be used for working capital or inventory, consolidating or repaying debt, or most refinancing.
Terms, Interest Rates
and Fees
Interest rates on 504 loans
are based on the current market rate for five-year and 10-year
U.S. Treasury issues plus an increment above the Treasury rate,
based on market conditions. Only maturities of 10 and 20 years
are available. Fees total approximately 3% of the debenture and
may be financed with the loan.
Collateral
Generally the project assets being financed are used as
collateral. Personal guaranties of the principal owners are also
required.
Eligibility
To be eligible, the business generally must be operated for
profit and fall within the size standards set be the SBA. Under
the 504 Program, a business qualifies as small if it does not
have a tangible net worth in excess of $6 million and does not
have an average net income in excess of $2 million after taxes
for the preceding two years, or if it meets standard 7(a)
criteria. Loans cannot be made to businesses engaged in
speculation or investment.
For more information about loan qualification:
Northern Hills Community
Development
PO Box 218
Sturgis, SD 57785-0218
(605) 347-5837
1998 Copyright Bison Promotions bison@iw.net