The majority of New England companies are eligible for SECTION 504 Financing.   The business, together with its affiliates, must meet certain requirements in order to be eligible for the benefits of the program:

* Can be waived in certain circumstances

Size of Business

The tangible net worth of the borrowing company, including affiliates and other companies under common control, cannot exceed $7,000,000.  The average NPAT (net profit after tax) for the most recent two years (excluding loss carry-forwards) cannot exceed $2,500,000 per year.  Or, the total after tax earnings for the last two years, when added together, cannot exceed $5,000,000.

In the event that either the net worth or the NPAT size maximum is exceeded, alternative size standards may be used to measure the size of the business so that the borrower that exceeds the maximum size standards may still be eligible for financing.

1. Existing buildings:

The company must occupy at least 51% of the total space.

2. Newly constructed buildings:

The operating company must initially occupy 60% of the space available and intend to commence expansion into the remaining space within three years and occupy at least 80% of the facility by the end of the tenth year.  The remaining 20% of the building may be leased permanently to an unrelated third party.

Ownership Structure

The operating company may be organized as a corporation, partnership, proprietorship, limited liability company, or producers' cooperative.  A passive entity such as a realty trust, partnership, sub-S corporation, etc. may be the borrower and lease the property to the operating company.  There is no requirement that the ownership structure of both companies be the same.  However, the loan must be guaranteed by both the operating company, as well as each owner of 20% or more interest in either entity.