When it's Time to Grow Your Shop, Consider Several Sources for Funds

Looking to expand? Here's a quick-hit list of money sources.

The biggest, and most popular SBA loan program, is the 7(a) Loan Guarantee Program. The SBA guarantees up to $750,000 or 75 percent of the total amount, whichever is less. For loans of less than $100,000, the guarantee usually tops out at 80 percent of the total loan. A 7(a) loan can be used for many business purposes, including real estate, equipment, working capital or inventory.

At the top end of the SBA spectrum is the 504 Loan Program that provides long-term, fixed-rate loans for financing fixed assets, usually real estate and equipment. The 504 loans are usually made through Certified Development Companies — nonprofit intermediaries that work with the SBA, banks and businesses looking for financing. Typical percentages for this type of package are 50-percent financed by the bank, 40-percent by the CDC and 10-percent by the business.

In exchange for this below-market, fixed rate financing, the SBA expects the business to create or retain jobs or to meet certain public policy goals.

Local funding

Among the best sources of assistance are the many state, regional and local economic development agencies. There are nearly 12,000 economic development groups in the U.S. whose purpose is to provide economic growth and development in the areas they serve. They generally encourage new or expanding businesses to locate in their area, or to remain in the area.

While not always a source of expansion financing, a state's office or agency of economic development can be a guide to regional and local funding.

Financing the growth of a repair shop is a complex affair. Money to help grow and expand the operation is, however, widely available to those owners willing to do their homework. Comparison-shopping for lenders, rates and terms is strongly recommended.

Mark Battersby is a nationally syndicated tax and financial columnist and book author.

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