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Small Manufacturers Benefit from SBA 504 Equipment Financing and Sales and Use Tax Exemption

Apr 2015

Many small manufacturers don't know this, but heavy duty fixed machinery and equipment can be financed under the Small Business Administration (SBA) 504 Loan Program either as a stand alone project or as part of a real estate transaction. Other than justifying economic lifespan, an SBA 504 equipment loan is no different from any other 504 loan.

Small manufacturers looking to grow and expand their operations in Florida through the purchase of heavy duty fixed machinery and equipment can benefit from up to 90% commercial financing through SBA 504 Loan Program. And as an added bonus, industrial equipment purchases are temporarily exempt from state sales and use tax.

Small manufacturers who qualify for SBA 504 financing may be eligible for up to $5.5 million per project on the SBA second mortgage portion of their project with as little as 10% down at below-market, fixed interest rates with amortization terms of 10 or 20 years (based on the useful life declaration from the manufacturer or appraiser).

There is no limit on the number of SBA 504 loan projects allowed to small manufacturers, which means that small manufacturers looking for additional 504 financing may be eligible even if they have committed or outstanding SBA loans.

Additionally, funds for small manufacturing projects are not limited by the SBA's usual aggregate lending limit of $5 million per borrower, which means small manufacturers that previously reached their SBA maximum have the ability to receive additional loans.

There is no limit on the amount of the first mortgage of a 504 project (which is provided by a 504 commercial lending partner working in conjunction with Florida First Capital) and therefore no maximum project size. In many cases, qualified small manufacturers with projects exceeding $20 million can obtain up to 90% financing under the SBA 504 Loan Program.

To qualify, a small manufacturer must have fewer than 500 employees and meet the definition of a small to mid-sized manufacturer as classified in sector 31, 32, or 33 of the North American Industry Classification System. Additionally, all production facilities must be located in the United States.

The applicant also must be considered a small business defined as follows: for-profit, owner-occupied, credit worthy businesses located in Florida with a maximum tangible net worth of not more than $15 million and average net income after Federal income taxes (excluding carry-over losses) for the two full fiscal years prior to application of not more than $5 million.

Sales and Use Tax Exemption

Florida's small manufacturers can currently benefit from an exemption of sales and use tax on purchases of certain industrial machinery and equipment that began on April 30, 2014, and runs through April 30, 2017. The exemption applies to industrial machinery and equipment purchased by manufacturing businesses to be used at a fixed location within Florida.

To be eligible for the exemption, machinery and equipment must used as an integral part in the manufacturing, processing, compounding or production of tangible personal property for sale and it must have a depreciable life of three years or more.

The sales and use tax break in conjunction with up to 90% financing at below-market, fixed interest rates under the SBA 504 Loan Program for the purchase and installation of industrial machinery and equipment is a win-win for growing and expanding small manufacturers in Florida.

Get Started on an SBA 504 Machinery and Equipment Loan

For more information about the SBA 504 Loan Program in Florida,contact a Florida First Capital Loan Officer hereor email us atinfo@ffcfc.com. Phone: 850.681.3601 or toll-free at 888.320.5504.