There are obvious benefits of reducing your energy consumption, such as lower electric bills and the positive environmental impact. Thanks to a great program from the SBA, business owners looking to purchase commercial real estate have more incentives than ever for going green. Community Business Finance's 504 Loan Program is an effective way for businesses to get financing with below market interest rates and a 10% down payment. By including energy-efficient upgrades into the project, business owners can dramatically increase their long-term savings as well as reduce their out-of-pocket costs.
Unlimited 504 Financing
Under SBA regulations, a business is capped at $5 million in total 504 loan financing. However, by including methods of reducing energy consumption, this cap is raised to $5.5 million, and a business can use a 504 loan for every qualifying project with no limit on the number of projects. 504 loans can be used to purchase land, real estate plus improvements, new construction and/or equipment. Closing costs and soft costs can also be included.
The SBA guaranteed portion of the loan is up to 40% for a maximum of $5.5 million, and a commercial lender funds at least 50% of the total project cost, with no limit on this first lien. This means that there is no limit to the size or number of 504 loan projects that a business may finance, as long as they qualify.
How to Qualify
First, your business must qualify for a 504 loan. These qualifications are explained in our 504 School. To qualify as a green energy project, one of two criteria must be met. The project must reduce your energy consumption by at least 10% or the upgrades must produce at least 10% of the energy used from renewable sources, such as solar power. It is important to note that new construction only qualifies if it meets the energy production criteria.
Upgrades for renewable energy sources include installing solar panels and wind turbines and using biofuels. Upgrades for reducing energy consumption include new HVAC, lighting, windows, insulation, and building automation.
Long Term Benefits
Federal Tax Credit - The Federal Business Energy Investment Tax Credit is in effect through December 2016. This gives federal tax credits to business owners that make qualifying energy-saving upgrades.
Utility Savings – Energy-efficient upgrades can dramatically reduce energy costs. It is possible to recoup the cost of the upgrades in just a few years depending on the amount of savings.
Increased Resale Value – When businesses are ready to sell the building, the money invested in green upgrades adds value to future buyers.
Going green has many advantages, and Community Business Finance's 504 Loan Program can help your business make the changes needed to reap the benefits of becoming more energy-efficient.
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