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SBA 504 Loan Case Study

Manufacturing Equipment and Building Loan

August 6, 2019
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Small Business Administration (sba) 504 Loan

The SBA 504 loan program partners with a financial institution to create an attractive financing package to benefit businesses. Working together with the SBA and Business Lending Partners, growing businesses throughout Wisconsin can receive affordable, long-term, fixed-rate financing to expand operations and create job opportunities.

plastic manufacturer - wisconsin

The purpose of this multifaceted SBA 504 Loan is to assist two affiliated companies with two separate projects. As a result of both requests, 20 full-time jobs will be created in the next two years. Utilizing the SBA 504 Loan program, in partnership with a local bank, the company found the ideal financing solution to meet their growing needs.

Borrower is facing capacity issues and must turn away business. This loan will go towards the purchase and installation of a new equipment line to help keep up with high demand.

  • Source of Equity: Business Cash/ Line of Credit
  • Term: 20 years
  • Rate: 3.53% (August 2019)

Borrower owns building under a separate entity and plans to renovate to support the growth of the company.

  • Source of Equity: Business Cash/ Line of Credit
  • Term: 25 years
  • Rate: 3.630% (August 2019)

LENDER TESTIMONY

“Settlers bank appreciates its partnership with BLP. BLP’s focus on service and flexibility has been valuable in providing our client the funds they need for equipment critical to their growth and improvements to their plant. The opportunity to establish a long term fixed interest rate at current rates is tremendous and makes this transaction a big win for all parties.”
Edward Kinney
Edward Kinney
Senior Vice President, Settlers Bank

WHAT WAS UNIQUE ABOUT THIS LOAN?

The equipment was financed for a longer term than usual through documented ‘life of equipment’ as part of the application, further helping with cash flow for this growing business.

The source of equity for the building loan was ‘equity in the building’ (important note – only the equipment loan relied on cash).

Both loans will follow the structure outlined below:

50%
BANK
40%
SBA 504
10%
EQUITY

STRENGTHS

  • Experienced management team with strategic vision

  • Catering to current consumer preference

  • Considerable sales growth in recent years

WEAKNESSES

  • Consumer preferences can change and can be somewhat fragile

  • Collateral is under 100% -- normal for SBA in subordinate lien position

SBA 504 ELIGIBILITY

  • Size Standard: Net worth < $15million and PAT < $5.5 million
  • SBA Capacity: Project requests $5 million or less
  • Job Creation/Retention: 1 FTE/$75,00 or 1/$120,000
  • Occupancy: 100% used for the business

Contact Us with your business financing needs

Carolyn Engel
Carolyn Engel
Business Finance Manager
Carolyn has been with BLP for over 20 years. Carolyn oversees business operations, various loan programs, screening applicants for eligibility and loan processing.
Racine Office262.898.7420carolyn@blp504.org
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