Since the 1980s, the SBA approved over 350 H-GALDC 504 loans, creating more than 3,000 jobs in the H-GAC region.
What is H-GALDC?
The Houston-Galveston Area Local Development Corporation (H-GALDC) dba Gulf Coast Small Business Finance Corporation, is a non-profit corporation promoting economic development and job creation in the H-GAC region. By administering the Small Business Administration (SBA) 504 Loan Program, H-GALDC enables small businesses to create and retain jobs by providing long-term financing to small businesses for real estate acquisition, construction and equipment purchases.
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Who is eligible for the SBA 504 Loan?
Loans are for established for-profit businesses that are ready to expand by purchasing fixed assets ranging from $300,000 to several million dollars. The business must have a net worth less than $8.5 million and annual after tax profits of less than $3 million. Manufacturing firms with less than 500 employees may also be eligible. In addition, one new job must be created for every $50,000 worth of financing from the SBA.
How much money are you eligible for?
Typical projects range from $300,000 to $4 million. H-GALDC’s maximum participation is usually $1,500,000; however, the ceiling may increase to $2 million, in cases of minority ownership, (i.e., veteran and women-owned businesses), businesses located in rural/redeveloping locales, and businesses that export. Maximum participation of SBA is increased to $4 million for manufacturing firms.
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What can SBA 504 loan money be used for?
Purchasing
Existing Buildings
Machinery
Land and Improvements
Certain Types of Equipment
Construction
Modernization or Renovation of Existing Facilities
Construction Contingency Fund
Other
Professional Fees directly attributable to the Project
Interest on Interim Financing
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Benefits
SBA 504 loans offer lower, fixed interests rates and longer, 20-year repayment terms. The borrower also contributes less equity, which preserves working capital and improves the borrower’s cash flow. Borrowers can also roll most of the soft costs of obtaining the loan into the project financing. Partner lending institutions fund 50 percent of the project amount and hold the first lien on the loan. The low, fixed rate allows lenders to be more competitive and offer a unique funding opportunity in the market.
How does it work?
The SBA 504 Loan Program encourages lender participation by contributing up to 40 percent of a project’s cost and allows for a minimum of 10 percent equity (cash or land) injection from the borrower. The role of the H-GALDC is to work directly with the business applicants to develop financing packages that meet the SBA 504 Loan Program guidelines and credit criteria. The staff then processes, closes and services the loan. SBA-backed bonds are sold on the private market to fund the 504 portion of the loan.
What should you do next?
Contact one of the H-GALDC staff members to assist you in finding out how the SBA 504 loan program can help your growing business. Visit the University of Houston, Small Business Development Center to identify financing needs, then contact H-GALDC to learn more about the SBA 504 Loan Program.