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FINANCIAL TIP What is the 504 loan program? The CDC/504 Loan Program provides long-term, fixed rate financing for major fixed assets that promote business growth and job creation. 504 loans are available through Certified Development Companies (CDCs), the Small Business Administration’s (SBA) community-based partners who regulate nonprofits and promote economic development within their communities. CDCs are certified and regulated by the SBA. The maximum loan amount for a 504 loan is $5 million. For certain energy projects, the borrower can receive a 504 loan for up to $5.5 million per project, for up to three projects not to exceed $16.5 million total. ARE YOU ELIGIBLE? To be eligible for a 504 loan, your business must: • Operate as a for-profit company in the United States or its possessions • Have a tangible net worth of less than $15 million • Have an average net income of less than $5 million after federal income taxes for the two years preceding your application Other general eligibility standards include falling within SBA size guidelines, having qualified management expertise, a feasible business plan, good character and the ability to repay the loan. Loans cannot be made to businesses engaged in nonprofit, passive, or speculative activities. For additional information on eligibility criteria and loan application requirements, small businesses and lenders are encouraged to contact a Certified Development Company in their area. How to use a 504 loan A 504 loan can be used for a range of assets that promote business growth and job creation. These include the purchase or construction of: • Existing buildings or land • New facilities • Long-term machinery and equipment Or the improvement or modernization of: • Land, streets, utilities, parking lots and landscaping • Existing facilities A 504 loan cannot be used for: • Working capital or inventory • Consolidating, repaying or refinancing debt • Speculation or investment in rental real estate HOW TO APPLY 504 loans are available exclusively through Certified Development Companies (CDCs). First, find a CDC in your area to ensure you are dealing with a qualified lender. Then begin to prepare and assemble your 504 loan authorization package, using the 504 Authorization File Library at sba.gov to identify the documentation you will need to apply for your 504 CDC loan. HOW DO YOU PAY BACK A 504 LOAN? Loan repayment terms vary according to several factors: Repayment terms • Both 10- and 20-year maturity terms available Interest rates • Pegged to an increment above the current market rate for 5-year and 10- year U.S. Treasury issues • Totals approximately 3% of the debt, rate may be financed with the loan Existing borrowers can create an account in the SBA Capital Access Financial System (or CAFS) to monitor their loan status. DETAILING MADE EASY WITH READY-TO-USE PRODUCTS NEW 22oz Sizes, offer convenience and ease of use for interior and exterior detailing. • Convenient 22 oz. spray bottle • No dilution required • Spray on, Wipe off Contact your distributor today, to purchase Bug-Off Insect Remover, Complete Wheel and Tire Cleaner, E-Zee Shine Premium Emulsion Dressing, and Oxy Carpet and Upholstery Cleaner in 22 oz. RTU bottles. www. malcoautomotive.com @MalcoAutomotive @MalcoAutomotive MalcoAutomotive 4 | AUTO DETAILING NEWS | VOL. 7, NO. 4 • WINTER 2022 0000 Malco Auto Detailing News Sept Ad 2022.indd 1 8/2/2022 2:19:59 PM
DETAIL DOCTOR This land is my land, and their land Everything you need to know when it comes to leasing Bud Abraham is Founder and President Emeritus of DETAIL PLUS Car Appearance Systems, with more than 40 years of experience in the car care industry as a manufacturer, operator, distributor and consultant. He writes articles and gives seminars on the subject of auto detailing throughout the automotive industry. He can be reached at buda@detailplus.com. By Bud Abraham buda@detailplus.com With the detail business improving and more revenues being generated by liquid glass coatings many detail business owners are either looking for a larger business property space or mobile detailers are looking for a place to call ‘home.’ That being the case, it’s important that you understand your rights as a lessee, as well as the responsibilities of the landlord. Gaining this understanding begins from the moment you find a particular property and begin negotiations. To not get ‘burned’ with a lease in which you will have to live with for 4 to 5 years it is important you know the fine points of leasing. Most of all commercial leases are similar in nature whether it’s for a detail operation or for a convenience store. And, regardless of how much you think you know, it’s crucial to hire an experienced real-estate attorney to advise you before negotiating and closing any deal. Note any red flags you see with a socalled experienced real estate attorney. If an attorney is inexperienced, they’ll ‘hyper-focus’ on one issue and miss something more important. They might get wrapped up in some little thing and won’t address, for example, a relocation clause. Also, make sure he or she is specifically a real estate attorney. You can contact your state’s Bar Association to make sure they are a qualified candidate hire. IS DETAILING ALLOWED? Most commercial leases will have property use restrictions, and often a detail business might include an activity that is listed as restricted. So, you’ve got to make sure a proposed lease allows detail businesses at the site. You must also disclose you will be washing vehicles and cleaning greasy engines, or this could come back and be a big problem later on and eventually forcing you to relocate. You will want to make sure the site has a wash bay or area with a grease trap and a connection to the sanitary sewer. If it does not, this is something you can negotiate with the landlord to install for both his and your protection. WEIGHING THE TERMS The monthly rent amount has to near the top when it comes to weighing the various commercial lease terms. Another is the impact fee, which is a one-time charge that can be exorbitant for detail businesses, depending on which state or city you’re looking to locate in. Also, a lease length and the options to renew are right up there, too, in terms of priorities. If I were you, I would want is a fiveyear lease with a five-year option (to renew). When a tenant has an option in their lease, it’s completely one-sided. It only benefits the tenant. It never benefits the landlord. When you have an option, all you have to do is say, ‘I’m exercising my option’ and you stay. But, if the (rental) market goes south, you can choose not to exercise your option and then renegotiate a lower rent. If and when you’re a tenant, you have to fight for as many options as you can. Also, negotiate for a period of time to complete any buildout needed before you open your detail business. If you get 30 to 60 days for buildout and 30 days free rent, why not ask for a total of 90 days? If you get the buildout done sooner, you don’t have to start paying any rent. I would say, ‘Mr. Landlord, the reason to do that is it gets me motivated to push the contractor to get done by working nights and weekends.’ Landlords want tenants’ businesses opened as fast as possible. VOL. 7, NO.4 • WINTER 2022 | AUTO DETAILING NEWS | 5
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