Lenders examine 5 attributes of borrowers when making financing decisions. These are referred to as the 5 “C’s”:
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Collateral
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Cash Flow (capacity to repay)
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Credit Analysis
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Character
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Capital
Eligible Borrowers:
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For-profit, non-publicly traded businesses.
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Tangible business net worth (including affiliates) not to exceed $8.5 million.
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Average net income of the business not to exceed $3 million over the previous two years.
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Personal liquidity of each principal/guarantor not to exceed the total project costs of the proposed 504 loan.
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Ownership must be comprised of 51% U.S. citizens or resident aliens (Legal Permanent Residents).
Ineligible Borrowers:
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Non-profits (except sheltered workshops).
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Passive holders of real estate and/or personal property.
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Lending institutions (mortgage brokers and correspondent lenders are eligible).
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Life insurance companies (however, franchised agents are eligible).
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Businesses located in a foreign country or owned by aliens.
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Businesses selling products/services through a pyramid plan.
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Illegal businesses.
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Gambling concerns.
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Businesses which restrict patronage.
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Government owned entities (excluding Native American Tribes).
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Businesses engaged in promoting religion.
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Consumer and marketing cooperatives (producer cooperatives are eligible).
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Businesses engaged in loan packaging.
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Businesses owned by persons of poor character.
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Businesses providing prurient sexual material.
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Businesses that have previously defaulted on a Federal loan.
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Businesses engaged in political or lobbying activities.
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Speculative businesses.
If your business didn’t appear on the Eligible or Ineligible list, please call Braudis Pegram at 718-471-0691 to discuss.
Ineligible Use of Funds:
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Refinancing (unless debt has been in place for less than 9 months).
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Working capital.
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Inventory.
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Rolling stock.
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Business “good will” (common in business acquisition financing).