Current Market Rates and Programs for the Long Island Commercial Marketplace

Current Market Rates and Programs for the Long Island Commercial Marketplace. The SBA 504 loan program offers long term (10 or 20 years) fixed rate subordinate mortgage financing for the purchase and renovations of existing buildings or new buildings and equipment. Loans are up to 40% of the project cost, maximum of $5,500,000 for manufacturers and loans involving energy reduction and $5,000,000 for all other businesses. A first mortgage lender usually finances the first 50% of the project. The principal(s) or company injects 10% equity. The operating company must be a small business. To be eligible, the business must be operated for profit and fall within the size standards set by the SBA. Under the 504 Program, the business qualifies as small if it does not have a tangible net worth in excess of $15.0 million and does not have an average net income in excess of $5 million after taxes for the preceding two years. Loans are available to retail, service, professional, wholesale, and manufacturing companies.
The 7(a) Loan Guaranty Program is one of SBA's primary lending programs.  The primary lender makes the loan, with up to 75% guaranteed by the SBA. SBA 7(a) loans provide financing for most business purposes, including the purchase of real estate, buildings, equipment and machinery, inventory, refinancing, and working capital. The SBA 7(a) is capped at $5,000,000, although the loan amount can be higher. SBA loan programs are generally intended to encourage longer term financing, but actual loan maturities are based on the purpose of the loan proceeds and the useful life of the assets financed, including: Working Capital: up to 7 years Machinery and Equipment: based on the economic life of the asset, typically up to 10 years, Real Estate: up to 25 years. Pre-payment penalties are a declining scale for the first three years of the loan and there are no pre-payment penalties after year three.
Empire State Development Corporation (formerly NYS Department of Economic Development) is New York States economic development agency. Under their Job Development Authority (JDA) loan program, they can finance up to 40% of the total project amount for capital assets (subordinated to a bank). This includes new or existing buildings and equipment. Their loans are usually for the same term as the banks. They offer low interest loans, both tax free and taxable rates. They can be combined with the SBA 504 Program for a larger second mortgage. In some cases, they can offer incentive grants and loans which can include infrastructure loans. Subsidized training assistance is available.
IDA's are authorized to issue tax exempt and taxable Industrial Revenue Bonds (IRB's). Bonds can be used to acquire existing buildings and equipment or used for construction of new buildings for manufacturers, warehouse users, and other applications. Rates can be substantially below regular mortgage rates. These agencies are authorized to offer real estate tax abatements, sales tax abatements and elimination of mortgage recording taxes. They also offer a straight lease transaction where they will offer these incentives without the issuance of a bond.
Many companies have been able to qualify for real estate tax abatements and low cost financing to offset higher costs of land in certain locations. Economic Development Zones (EDZ's) exist in Brookhaven town and Riverhead town. Companies located in these zones are eligible for 10% state investment tax credit, real property tax exemptions up to 100% for the first seven years, wage tax credits, sales tax credits on personal property and building materials, and a 3% reduction in utility bills for businesses other than retail. The State also offers real estate tax abatements under the real property tax law (485B) which allows for a 50% reduction on increased assessment attributed to a project regardless of location. These abatements are considered by the county or town Industrial Development Agencies (IDA's).


Information provided by:

Gallagher Associates
3505 Veterans Memorial Highway
Ronkonkoma, NY 11179
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