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Arizona businesses may benefit from CDC loans to buy property

Starting a business in Arizona often takes a leap of faith, not to mention a tremendous amount of planning and organization. There are countless details to tend to, and logistics to coordinate. An entrepreneurmust find a location for his business, and for many business owners, this means obtaining commercial property financing.

The Small Business Association operates a loan program through which it offers a Certified Development Company (CDC)/504 loan. To qualify for the loan, an applicant must meet specific eligibility requirements. The applicant must operate, or propose to operate, in the United States as a for-profit company. The loan is designed for businesses that have a tangible net worth that is less than $15 million and, in the preceding two years, have an average net income less than $5.0 million after taxes.

The loans are designed to help business owners to obtain fixed assets, such as commercial real estate or equipment. They will not be granted to businesses that intend to engage in speculation or to invest in real estate for rental purposes. The program has very specificrequirements for eligible and ineligible uses of loan proceeds. Most types of businesses are eligible for SBA financial assistance, but the SBA does not provide loans to certain types of businesses, such as dealers of rare coins and stamps, or those involved in lending activities.

To qualify for the CDC loan, a business applicant must have a feasible business plan and relevant management expertise. The SBA tries to determine whether the business appears to have a likelihood of profit such that a business owner would be in a position to repay the loan on time before approving an application. Furthermore, the SBA will require an applicant to provide a “Statement of Personal History” to help the agency assess the nature of the business owner’s character and willingness to pay their debts.

If you are considering applying for a CDC loan through the SBA, or other commercial property financing, you may benefit from legal counsel to assist you during the process.

Source: SBA.gov, “CDC/504 Loan Program Eligibility,” accessed Oct. 16, 2015

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