Hawaii Community Reinvestment Corporation (HCRC) is a Certified Development Company (CDC), authorized by the U.S. Small Business Administration (SBA) to serve the state of Hawaii and administer its 504 Loan Program. Working as a partner with the SBA and a private-sector lender, we assist small businesses in financing up to 90% of the purchase of long-term fixed assets, such as land, building (existing and new construction), and equipment.
Click on the links below for more information on the SBA 504 Loan Program:
- Lower down payment – in most cases, the business owner pays only 10% down, borrowing up to 90% of the total financing needs, thus preserving cash for the business;
- Longer repayment terms, 20 years, fully amortized for real estate loan and 10-years, fully amortized for equipment loans. The monthly loan payments are lower and more affordable for the business, improving its cash flow;
- Below market, fixed interest rate; and
- Projected income consideration – SBA considers projected income of a business in addition to historical cash flows. This is particularly advantageous for growing businesses.
Typical Structure – a SBA 504 Loan has three participants:
- Bank provides a first trust deed loan for at least 50% of the total project costs
- HCRC, a CDC, provides SBA guaranteed 504 loan for up to 40% of the total project cost (or a maximum of $5.0 million) ($5.5 million for projects that reduce business’ energy consumption by 10%)
- Company/small business owner contributes a down payment of at least 10%
To be eligible for an SBA 504 loan, a borrower must be a for-profit business. The business can be organized as a corporation, partnership, sole proprietor, or limited liability company.
The business and its affiliates must have a NET worth not greater than $15MM. Average after tax net profits during the previous 2 years cannot exceed $5MM per year.
The principals (owners) of the business must be US citizens or registered aliens with a green card. Owners must be of good character. Anyone who owns 20% or more of the operating company must personally guarantee the loan.
Liquid assets of the principals are taken into account in determining eligibility. If an owner has enough liquidity to finance the project without the assistance of an SBA 504 loan, the request may be deemed ineligible. If you are unsure of your eligibility, please contact our office and we will help to determine it.
Another lender must be willing to participate in the financing.
The owner-user of the project being financed must occupy 51% of an existing building; 60% of a newly constructed building (with the intent of occupying 80% within the following 3-10 years).