Small Business Administration 504
The Small Business Administration (SBA) 504 Loan Program provides long-term, fixed asset financing for the expansion of small for-profit corporations, partnerships, or proprietorships. Loan funds may be used to purchase real estate, certain
Machinery and equipment, or for new construction or building improvements. The loan structure typically requires 10% participation from the borrower, 50% first lien bank financing, and 40% from the SBA.
Interest is fixed, based on 10 or 20 year T-bill rate. One job must be created or retained for each $35,000 loaned. The maximum dollar amount is $1 million.
Small Business Administration 7(a)
The 7(a) program fosters and promotes the growth and development of small businesses by facilitating small business concerns' assess to capital through the utilization of loan guarantees to qualified private
lender participants. The 7(a) program provides loan guarantees to participating lenders for loans advanced to eligible small business concerns. The participating lenders provide all direct funds. Loan maturities are normally limited to 7 years for working capital, 10 years for machinery and equipment purchases, and 25 years for real estate. The maximum guaranty is 85% for loans under $150,000, and 75% for loans more than $150,000. The maximum interest rate is prime plus 2-3/4%. The maximum dollar amount that SBA can guarantee is $1 million.
Empowerment Zone (EZ)
The Gary, East Chicago, Hammond Empowerment Zone is a federally sponsored comprehensive redevelopment program that affords the three cities the opportunity to create jobs, attract new businesses, strengthen the three communities, and address an aged infrastructure. Tax incentives include:
- Bond Financing - State and local governments can issue Enterprise Zone Facility Bonds to make loans at lower interest rates to Enterprise Zone Businesses to finance qualified zone property.
- Employee Tax Credits - Credit against federal taxes up to $3,000 for each year of EZ designation for every employee and new hire that lives and works within the EZ boundaries.
- Environmental Cleanup Cost Deduction - Businesses can elect to deduct qualified cleanup costs of hazardous substance in certain areas (brownfields) in the tax year the business pays or incurs the cost.
- New Market Tax Credit - Equity investors in qualified Community Development Entities (CDFs) can obtain a tax credit against federal taxes of 5 to 6% of the amount invested for each of the years the investment is held, for up to seven years of the credit period.
- Section 179 Deduction - Section 179 of the Internal Revenue Code allows businesses to choose to deduct all or part of the cost of certain qualifying property in the year they place it in service.