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Bill Rinaldi Talks 504 Loans

bill rinaldi talks 504 loansUnderstanding the benefits of an SBA 504 loan is the first step to determining whether it is the right type of financing for your business. Here, Bill Rinaldi, President of the Northeastern Economic Developlment Company of PA-CDC, explains the best uses for the 504 loan in a recent interview:


What is an SBA 504 Loan and what are some of the most common benefits?

Bill Rinaldi:

For many small business owners, an SBA loan can provide the funds needed to fulfill a variety of needs like buying equipment or real estate. A 504 loan can also be used to make improvements or renovations to existing business facilities.

One of the most important benefits that 504 loans offer is that they typically require only a 10% down payment in many cases, while traditional commercial loans require a 20-30% down payment. Another major benefit is the low interest rate, which normally falls in the range of 3-4%. The long repayment terms of a 504 loan are also attractive, which can be 20 years for real estate and 10 years for equipment, as opposed to the 5-10 repayment period for most traditional commercial loans. Lastly, 504’s typically don’t require additional collateral because the real estate or equipment be financed acts as the collateral for the loan.


How can a small business owner qualify for a 504 Loan?

Bill Rinaldi:

Qualifying for a 504 loan is somewhat similar to qualifying for a traditional bank loan, with only a few unique requirements. It is important to have strong credit and have the ability to make the necessary down payment. It is also better if you don’t have a significant amount of additional outstanding debt. In order to qualify as a 504, the loan must be used to buy an existing building which needs to be at least 51% owner occupied or a new building that is at least 60% owner occupied. If buying equipment, it must have at least a 10 year economic life. The business itself must also have an average net income less than $5 million after taxes for the last two years and a tangible net worth less than $15 million. The borrower must also be able to demonstrate how the loan will help to create new jobs in the community or enhance public policy goals in some way.


How is a 504 loan structured and who are the parties that are involved?

Bill Rinaldi:

There are actually three parties involved in funding a 504 loan: the bank, the certified development company, and the small business owner. The bank is typically responsible for making 50% of the loan amount borrower, while the CDC is responsible for the SBA-guaranteed portion of the loan which is 40%. This leaves the last 10% for the small business owner which is normally covered by the down payment.


Is applying for a 504 loan complicated?

Bill Rinaldi:

As I previously mentioned, the process of applying and qualifying for a 504 loan is very similar to that of a traditional commercial bank loan, however the long repayment terms, low down payment and low interest rate should make the 504 loan one of the first types of financing a small business owner should consider. The experts at NEDCO are here to assist small businesses through every step of the process, and ready to help business owners achieve their goals by securing 504 financing.

To find out more info Bill Rinaldi, 504 loans or to talk to an expert at NEDCO, contact us today.

Budgeting Tips for Small Business Owners

budgeting tips for small business ownersMost business owners just starting out are working with a limited budget and conserving money is extremely important. Even with a solid budgeting plan, many business owners are concerned that unexpected expenses will negatively impact their businesses. Fortunately, there are several things you can do to cushion your business and reduce the risk associated with unexpected expenses.

Overestimate Expenses

Businesses that operate on a project by project basis understand that no two projects are alike. This makes it nearly impossible to predict unanticipated costs, and sizable one offs can send any budget in a downward spiral. To overcome these unexpected expenses, determine you anticipated line item costs, and set your budget slightly above those costs. This will help you be more prepared and take the sting out of unforeseen expenses.

Know Your Risks

Understand any threats to productivity and take time to map out your potential risks. Unexpected changes in health care requirements or minimum wage can greatly impact your risk along with the seasonality of your work and unforeseen natural disasters. By recognizing your potential short term and long term risks, your business will be better prepared for the future.

Carefully Plan for Large Purchases

It can be easy to plan out large purchases like building renovations or expensive software, and these type of purchases should not be made flippantly. In order to balance the risk associated with unforeseen business expenses, substantial business purchases should be timed carefully. It’s important utilize financial projections and current information to avoid placing unnecessary burdens on your business.

By following these budgeting tips for small business owners and creating realistic budgets, your small business can avoid many of the common pitfalls associated with unexpected expenses. For more information on business budgeting or financing for upcoming projects, contact one of our representatives today.

CREED Act to Help Small Business Owners

Now that a permanent 504 debt refinancing program is official, small business owners will have better opportunities for growth and prosperity. The CREED (Commercial Real Estate and Economic Development) Act, S. 966 is a bill that has been approved to re-institute debt refinancing using the 504 program.

The CREED Act was reintroduced by Rep. Judy Chu back in Spring of 2015 to help small businesses gain more access to capital by extending the SBA’s 504 refinancing program. According to Rep. Chu:

“Small businesses account for two out of every three jobs that are created. Which means that the best way to cement the gains of the still fragile economy recover is to put more capital in the hands of those job creators. And that is exactly what this bill will do. While small businesses continue to face challenges with unreasonable real estate loans, this bill allows businesses to take advantage of low interest rates by refinancing existing loans and locking in long-term, fixed-rate financing so that they can create jobs and boost economic growth. All at zero cost to the taxpayers! This is a smart, bipartisan policy that works, but it has not been reauthorized since the 2012 trial year. At that time, over 2,700 businesses refinanced nearly $7 billion in old, expensive debt. Extending the program for another five years would help an additional 250,000 small businesses, saving each of them up to $20,000 per month.”

The 504 Loan Refinancing Program allows small business owners to refinance their eligible fixed assets, including commercial property. It involves pairing conventional loans with government-guaranteed loans, enabling small businesses to lock in stable, long-term financing. This program was originally enacted in 2011, but had expired in September of 2012.

According to Claire O’Rouke, Vice President of Government Relations for the National Association of Development Companies (NADCO), it is still uncertain when the program will officially be available to small business owners waiting on the SBA’s upcoming regulations. Industry experts believe the program may be available as early as June of this year, despite the complicated regulatory process.

To find out more information about the CREED Act and how NEDCO can help your small business to secure refinancing, contact our experienced professionals today.

7 Tips to Detect Fraud in Your Business

detect fraudCompletely preventing fraud may be the ultimate goal for small business owners, but what can you do to detect fraud that may already be occurring inside your company?

According to accounting expert Brian Kelly of Brian T. Kelly, CPA & Associates, LLC, in Carbondale and Honesdale, PA:

“In order to detect fraud in your business, (which can be very difficult due to collusion of employees, or trusting someone that has been your employee for numerous years), you must review “financial and non-financial information. As a business owner, you must meet with your senior level and lower level employees to discuss business operations, employee attitudes, comparative financial results and most importantly non-financial results to investigate any unusual or ‘head scratching’ observations.”

If you have suspicions of fraud in your small business, here are 10 things to look for that could lead you to discover fraudulent activity.

Tip 1 – Missing Documents

Missing documents are usually a major indicator of fraudulent activity. Naturally, accidents do happen, but you should always have clear explanations for missing documents are ensure that proper procedures are in place should documents go missing in the future.

Tip 2 – Complaints from Clients or Employees

It’s true that not all complaints may be warranted, however, it’s important that you pay attention to the complaints you receive surrounding a particular activity (or employee) in your organization, and they be a red flag for suspect activity.

Tip 3 – Suspicious Behavior

Be aware if any employee suddenly displays a suspicious change in behavior, such as excessive smoking, drinking, or increased irritability and defensiveness.

Tip 4 – Excessive Voids

Excessive voids are often a big indicator of theft. Be sure to watch for voided sales, duplicate payments or bogus refunds that lead to stolen money by an employee.

Tip 5 – General Ledger Out-of Balance

When your general ledger is out of balance, it is a sign that money or merchandise may have been stolen but the perpetrator was unable to make a false entry in order to force balance the records.

Tip 6 – Inventory Shortages

If you notice a sudden and drastic inventory shortage, it could possibly be caused by embezzlement or theft.

Tip 7 – Expense Accounts

Fraud is often concealed in individual employee expense accounts so it is extremely important to monitor usage and require reasonable explanations for discrepancies found.

Use this list to help detect fraud in your company and avoid many of the common pitfalls experienced by other small business owners.

5 Tips to Prevent Fraud in Your Company

prevent fraudSmall and midsize companies are at great risk and typically experience more fraud than larger companies according to the American Institute of Certified Public Accountants (AICPA). It is estimated that many businesses lose approximately 5% of their annual revenue due to incidents involving fraudulent activities.

According to accounting expert Brian Kelly of Brian T. Kelly, CPA & Associates, LLC, in Carbondale and Honesdale, PA:

“Fraud is an intentional act that can be carried out by one or numerous individuals within an entity. The smaller the entity the greater the risk of fraud due to limited internal controls or qualified personnel. As an owner of a small business, it is imperative to review monthly internal reports, bank statements, payroll reports for any suspicious disbursements or unusual transactions.”

Having an effective fraud prevention program in place is one of the best ways you can minimize fraud in your company. Here are 5 tips to prevent fraud by implementing proactive techniques designed to stop employee fraud.

Tip 1 – Perform Background Checks

One way to help prevent fraud is to start early during the hiring process by always performing accurate background checks. Be sure to check references, current employment, certifications, credit, and licensing for all new hires.

Tip 2 – Segregate Duties

Remember that no one employee should have too much control or power over sensitive information or duties like accounting and accounts payable. Always review payroll checks and never allow the person who receives mail reconcile accounts.

Tip 3 – Require Authorization

Ensure the employees aren’t exceeding their authority by requiring authorization for all important transactions or activities.

Tip 4 – Audit

Have procedures for independent audits including inventory counts and surprise check ups to deter employees from committing fraud and encourage compliance with company policies. You should also provide a means to allow other employees to report fraudulent behavior anonymously.

Tip 5 – Have a Manual

Having an employee manual that outlines both acceptable and unacceptable behavior sets expectations for your employees right from the start. It clarifies the rules and gives your employee an important point of reference.

Follow these tips to minimize fraud in your small business and promote a productive work environment that sets your employees up for success.

Understanding Cost Segregation

Many small to medium sized business owners have only recently been introduced to the concept of cost segregation and how it can help their businesses. If you are new to cost segregation and are interested in finding out more about this strategic tax planning tool, read on for in depth advice from industry expert James Doughtery, of ELB Consulting Inc:

Cost Segregation is a commonly used strategic tax planning tool that allows individuals and companies, who have purchased, constructed, remodeled or, expanded any kind of real estate to increase cash flow by accelerating depreciation deductions and deferring federal and state income taxes.

The benefits of a cost segregation study include:

  • An immediate increase in cash flow
  • A reduction in current tax liability
  • The deferral of taxes
  • The ability to reclaim “missed” depreciation deductions from prior years (without having to amend tax returns)

At ELB, we take pride in over 20 years of industry experience, and maximizing the tax deduction and deprecation opportunities for our clients. “The right experience truly makes a difference.”

ELB has completed over 10,500 studies ranging in size from small office remodels to billion dollar high-tech manufacturing plants. Our skilled staff of cost segregation specialists uses the highest level of engineering methodology as defined by the I.R.S. to produce thorough, accurate, and dependable “fully engineered and accounted” cost segregation studies.


When comparing to the I.R.S. Audit Techniques Guide Methodologies, our report format and methodology exceeds the requirements of the Detailed Engineering Approach from Actual Cost Records or Detailed Engineering Cost Estimate Approach. Our team of experts has created the most detailed engineering methodology available to the market. The ELB Cost Segregation Study will account for ALL qualifying (5, 7 and 15 year items) and non-qualifying (39 year or 27.5 year items). This not only allows us to maximize depreciation by addressing components our competitors never considers, it provides our clients with a fixed asset tool.

Other firms produce an “engineered based” study format (Survey or Letter, or Residual as defined by the I.R.S.) which can result in thousands and/or millions of dollars still left on the table.

Our unique study format is “fully engineered and accounted” and provides the highest level study detail and tax benefits available to the client. This study format was developed for the following primary reasons:

ü Provide the most available tax benefits available to each client

ü Provide the most accurate and dependable engineered cost segregation study

ü Provide a study format that includes asset management and disposition features

ü Provide an unmatched study guarantee

CPA’s and the I.R.S. not only support our studies, but often ask our experts to review competitors’ report for accuracy. In fact, one of our partners is an Expert Witness for the U.S. Tax Court in cost segregation. He is considered by many as the Pioneer of the Industry.

We are confident in our work product. We personally guarantee each and every study. Should you ever encounter an audit, we stand behind and defend our study at no additional cost to you (Full Audit Protection Guarantee). Our in-house team of engineers, accountants and construction professionals has performed thousands of cost segregation studies, and we have NEVER had a study rejected by the I.R.S.

At ELB, we never settle for less, nor should you.

The SBA Fee Waiver and Reduction

The SBA has recently reduced two fees associated with their SBA 504 Loan Program, according to a recent announcement from the organization made in late September. This is exceptionally good news for anyone with an SBA loan approved on or before October 1, 2015, and a invaluable opportunity to reduce the costs typically associated with a 504 loan.

The rate that has been reduced is the Ongoing SBA Guarantee Fee, which has dropped from 0.9375% to 0.914%. The Ongoing SBA Guarantee Fee is part of the overall effective rate, and now translates to 91.4 basis points per annum of the outstanding balance of the loan.

In conjunction with this, the SBA has also decided to completely eliminate what was previously known as the Upfront SBA Guarantee Fee. This one time fee which covered the administrative costs added to the Net Debenture Proceeds, has been reduced from 0.5% to zero.

What does this mean to you and your small business? Simply put … it means that you’ll be saving money on your next SBA loan. The elimination of the Upfront SBA Guarantee Fee results in thousands of dollars saved in administrative costs on most loans, and pairing that with the Ongoing Fee reduction makes securing a future SBA loan a very attractive option for any business looking to grow.

If you own a small business and are thinking of expanding, now is a great time to consider an SBA Loan. To find out more information about the latest SBA fee waivers and reductions, or for information on how NEDCO can help you to secure an SBA loan, contact us today.

What to do if a Financial Crisis Hits

Crisis strikes every business at some time, and many times, it’s completely unexpected. However, those companies that react the best to a crisis often become tomorrow’s leaders.
However, if you find your company in a financial crisis, what do you do?

Here are some tips:

  • Relax and think. We live in a reactionary society. For whatever reason, most people wait for something bad to happen, get wound up emotionally, and then make a rash decision they end up regretting. Rather than following that path, let your emotions pass, calmly analyze the situation, and then start making decisions based on the reality you face, not on what you feel.
  • Proactively plan. You can’t plan for every possible scenario, especially if you’re getting to know a new business. But, if you are the type who is able to think ahead, do it and prepare for disaster. If you’re not, begin to develop this habit and consider what scenarios could happen in the near future for your business based on what’s happening right now and your experience in the past. If you are already prepared to handle a crisis, you may be able to quickly snatch up market share while your competitors figure out what hit them.
  • Don’t blame yourself or anyone else. Blame literally never helps. Try as you might, and as smart as you and your top employees are, every business goes through near catastrophe at some point. Blaming might make you feel better, but it does nothing to help your business move forward. The first of the order of the day is to get your business back on the right track, and the second is to figure out what went wrong and how to avoid it in the future.
  • Make sure your credit is good and you have available capital. Just in case you need to borrow, make sure you have a good credit score and capital available to you. This could be a 504 loan that we offer, reserve cash from recent profits you generated, your personal cash, or money you borrow from friends or family (although you should avoid this if at all possible). Just in case the worst happens, you want to be ready so you can get access to money and keep your business operations flowing as smoothly as possible.
  • Learn from what happened and avoid thinking of it as a “failure.” Once you get past the storm, analyze what went wrong and why you think it happened. Viewing the situation as a personal failure or a failure of someone else’s causes only judgmental feelings and negative thinking. Looking at the situation as an opportunity to learn, however, helps you prepare and makes your business stronger moving forward.

Enjoy Your Position Ahead of the Pack

Follow these tips during a time of crisis, and you might find yourself ahead of other businesses that react rashly. Few companies choose to think ahead – most react quickly to what just happened.

Should You Use Funds from an Angel Investor?

Let’s say you got a really exciting business idea, and you’re considering the many different ways you could use to acquire capital to get your business growing. Some of those sources could include:

  • 504 loans
  • Bank loans
  • Your own cash
  • Funds from family and friends
  • Crowdfunding websites like Kickstarter
  • Angel investing

But, is angel investing really a good source of funding for you and your business? Check out these pros and cons.

Pros of Angel Investing

  • You get money – If you need it and you’re happy to offer some equity in your company, angel investing may be a good choice for you. Getting access to capital at critical times during the early years of business can help you grow ahead of the competition early on.
  • You get smaller amounts – If you need less than half a million dollars to move your business forward, angel investing again may be the right solution. Venture capital typically seeks larger, more established businesses with consistent revenues already in place.
  • Flexibility – If the bank is too stubborn to give you access to money, angel investing may instead be the best solution. Angel investors are investing their own money, which means you can typically structure the deal in just about any way you and the investor agree to.

Cons of Angel Investing

So now you know the pros – let’s take a look at the cons:

  • Can cause more problems than it’s worth – If the investor is only interested in making money, they may be less patient and unwilling to offer any mentoring to you during the formative years of your business. Because “angel investor” isn’t an often advertised position or type of company, finding one and getting an accurate idea of its character can prove difficult.
  • May want a large share of your business – Angel investors may want to own 10% or more of your business. They view this as reasonable because they know investing in a young, unproven business carries a higher level of risk. In addition, they also know your access to other sources of capital is limited, which they can use to their advantage.
  • You may lose control – Depending on the investor, you may have to give up some of the control of your company. What you started and envisioned may no longer become a reality. This is particularly frustrating if the angel investor doesn’t have experience in your industry. It is, however, a reality of angel investing.
  • Rarely invest again – One-and-done is usually the rule with angel investing. Because it’s risky to buy a stake in a young company, an angel investor may not want to provide more capital should it become needed later on. You may have to find another investor and give up more control of your company, or search out another funding source.

So, Should You Do It?

Ultimately it’s up to you, but do be aware angel investing carries with it a number of inherent risks.

A 504 loan provides a low-interest, non-invasive alternative to angel investing for certain business types. If you need access to capital to grow now, consider contacting NEDCO to learn more.

How to Get the Most Out of Your Employees

Are people or finances your company’s greatest asset? Some great business leaders would argue one, some the other, and a few might say “both.”

Whatever your viewpoint is, you want to make sure you get the most out of them, but there are many different opinions on that also.

Here’s our take on how to do that:

  • Hire only self-motivated employees. Don’t worry too much about motivating your employees. You should provide incentives for desirable behavior and standards for acceptable workplace behavior, but you shouldn’t have to motivate them. You might have to for periods of time, but if they clearly can’t motivate themselves consistently, then it’s time to try someone else.
  • Reward desirable behavior. Use a mix of financial incentives and recognition techniques such as verbal praise and paper awards. Remember, you get more of what you focus on, so spend most of your time focusing on reinforcing what employees do well.
  • Focus on what they do well and forget about the rest. If you focus on the problems an employee is causing, that’s acceptable up to a point because they need to know what doesn’t work well at your company. However, if you spend too much time focusing on what your employees don’t do well, you’ll get more of it. Learn to let the little things go, as long as they do most things right.
  • Compensate them well – You may be able to justify lower wages in your mind, but make sure you know market rates for the positions where you need employees. Then, ensure you pay above those rates.

    First, this will help you attract the most talented employees who know what type of salary they command and will stay at workplaces that reward them. Second, employees who know they are compensated at an above average rate will work much harder for you. In the long run, this also reduces turnover and hiring costs substantially.
  • Fire quickly if it’s not a good fit – If you have what you know is a good employee but things aren’t going well, try them out 1-2 different places in your company first. If you know you made the wrong hire shortly after beginning a new working relationship, fire quickly. Major problems don’t get better. If there’s wrinkles though, make sure you give it a little time to work out – there’s bumps in almost every relationship at the beginning.

Enjoy Better Productivity and a Healthier Bottom Line

It can be tempting to think you’ll make more money if you reduce salaries and cut every corner, but quite the opposite is true – the more you give, the more you get. Treat your employees well and (in most cases), they’ll treat you well. Ultimately, your profit margins will reflect your wise decision making.