02 May HiFive Helps Hotel Projects Get Financed
HiFive provides financial services promoting you and your Hotel to Lenders while incorporating the SBA’s Green Design standards to maximize your SBA Loan eligibility. Also, the major brands are increasing the baseline in the hospitality industry as the cost of non-renewable energy continues to rise, regulatory pressure increases, and consumers become more demanding. Many savvy Hotel Owners are taking advantage of the SBA Green 504 Loans while staying ahead of the emerging sustainability curve.
Under the Jobs Act provisions, SBA has permanently increased 7(a) and 504 limits from $2 million to $5 million, and for certain energy-related projects seeking 504 loans, to $5.5 million. SBA has already put in place the alternate size standard that expands eligibility for SBA-backed loans that was included in the Jobs Act, increasing the alternate size standard to include those small businesses with less than $15 million in net worth and $5 million in average net income.
Green 504 Loans
The SBA Green 504 Loan has multiple benefits:
- It allows for both larger SBA loans and multiple SBA loans to the same applicant(s).
- The Green 504 loan is a second mortgage that can be as much as $5.5 million which makes transactions in the $12 to $20 million range possible…AND…loans are available on a “per project” basis. In other words, the “regular” SBA maximum eligibility limits of $5 million per borrower do not apply and larger businesses are able to utilize multiple 504 loans on multiple buildings.
- The usual SBA 504 jobs creation/jobs retention requirements do not apply, making larger loans for businesses with fewer employees possible. This could be very useful for qualifying hotels with plenty of square footage but few employees.
- It also provides financing for businesses to build energy efficient buildings. The larger loan sizes are more suitable to larger businesses and the recently expanded maximum tangible net worth and income requirements of $15 million and $5 million respectively make it easier for larger businesses to qualify.
- Businesses with net (after tax) income of up to $5 million can now qualify.
- The 504 program is one of a few affordable commercial loans available at this time.
- 504 loans are available with as little as 20% down/20% equity for hotels.
How To Qualify For the Green 504
The easiest way to qualify is to construct a new building that uses 10% less energy. It is important to remember that the 10% reduction is in energy consumption and not dollars saved on lower utility bills.
How to qualify if you do not own or lease a building now:
If you do not own a building currently and have no baseline for energy consumption, then SBA requires that you produce enough of your own energy to cut your consumption by the required 10% since you do not have a existing building to benchmark against.
You can produce the energy multiple ways using any of the common sources of renewable energy and the costs of installation can be included in the loan amount.
HiFive provides the resources in design and construction to meet the SBA qualification requirements whether you currently own a Hotel(s) or if this is your first Hotel.
Get More Eligibility By Going Green
As mentioned above, one of the key benefits of the Green 504 is that it removes the typical maximum $5 million SBA eligibility limit per borrower, which typically prevent successful businesses from gaining access to more credit guaranteed by the government.
And in the current environment, many lenders are unwilling to lend without a government guarantee of some type. The Green 504 opens up possibiliites for many businesses in need of financing.
As a result, a business can now build multiple facilities using the new maximum amount of SBA financing of $5.5 million for each project. And keep in mind, $5.5 million is the amount of the second mortgage guaranteed by SBA, which usually equates to 30% of the total financing and there is technically no limit on the amount of the first mortgage, so projects in the $10 to $20 million range are financeable.
504 Loans are for Owner Occupied Businesses
In order to be considered eligible for a 504 loan, you need to be a qualifying small or mid-sized business typically defined as:
- 51% or More Owner Occupied*
- For Profit
- Credit Worthy
- Tangible Net Worth Below $15 million
- Avg Net Income Not More Than $5 million**
* For new construction, your business must initially occupy at least 60% of the commercial space.
** Net income is calculated after Federal income taxes (and excluding carry-over losses) for the 2 fiscal years prior to application. Manufacturers are defined as having fewer than 500 employees.
SBA Green 504 – More Benefits
The 504 loan has always been an outstanding program and the green aspect has made it even better. In fact, going green can also bring you new customers. According to a recent study by Javelin Research, 43% of consumers said they are more likely to do business with companies they perceive to be green.
Significant Tax Benefits and Deductions for Going Green
Going Green can save you a lot of money and drastically reduce your energy usage, which is obviously great for lowering operating costs. Plus, green building can also net you hefty tax savings. The federal government and many state and local utilities have tax incentive plans for the installation of green and renewable energy systems that offer significant first-year rebates that can help offset some of the renewable energy installation costs.
HiFive makes the SBA process easy for you. We employ qualified architects to meet or exceed the SBA requirements for the Green 504 Loan, as well as the expertise to commission the needed services for tax rebates and credits. HiFive successfully helps clients secure the best financing, including the SBA Green Loan. Get started today on the path to success!