EDC rolls out new loan program aimed at small businesses
Feb. 14, 2013
The Dorchester Bay Economic Development Corporation has been newly designated as the city of Boston’s only certified development corporation authorized to administer the 504 Loan Program. The loan will allow business owners to buy existing buildings, buy new land or improve existing land, construct or remodel facilities, purchase capital, or refinance debt in relation to a new expansion.
Dorchester Bay will collaborate with the Small Business Administration (SBA), as well as local banks, to provide the financing. The 504 loan program, one of the SBA’s flagship programs, has been in place since 1981.
Unlike a typical loan, which requires the business owner to put 20 percent or more down on a commercial project, Dorchester Bay’s 504 loan requires only 10 percent, “which will save the business owner cash for working capital,” according to Dan DeSantis, director of economic development at Dorchester Bay.
“We can do any deal in the state, but of course we want to focus on the Dorchester area,” DeSantis said. “As Dorchester area grows, it becomes more successful. We want to be sure that our entrepreneurs have the opportunity to finance their own facility which will stabilize the business community in the area.”
The Dorchester Bay 504 loan is also unique in that it is a long-term, 20-year fixed loan. “This way, the borrower knows exactly how much he or she needs to pay,” DeSantis said.
The three key requirements for the 504 loan are: 50 percent of the loan is made by the bank, 40 percent, or up to $5 million, is made by a community-based lender, such as DBEDC and 10 percent equity paid by the business owner.
Since the program was just recently designated, only a couple of business owners have begun to use it so far.
“We’re working on a few loans now, but hopefully we can be churning them soon,” DeSantis said.
According to the SBA, the 504 loan program has proved over $50 billion in small business financing, which has helped create approximately 2 million jobs. The 504 loan program provided over $280 million in loans to small businesses in the Commonwealth last year.