The commercial real estate (CRE) market is rapidly evolving, and energy efficiency is becoming a key factor in property value, operating costs, and tax savings. Thanks to the Inflation Reduction Act, property owners now have access to expanded tax incentives under Section 179D, making energy-efficient improvements more financially rewarding than ever.

Whether you’re a building owner, investor, or developer, understanding these incentives can help you lower costs while increasing the long-term value of your properties.

What is Section 179D?

The Energy Efficient Commercial Buildings Tax Deduction (Section 179D) is a federal tax benefit that allows commercial property owners to deduct a portion of the costs associated with making their buildings more energy efficient.

The deduction has been significantly expanded under the Inflation Reduction Act, with updated provisions that provide greater financial benefits.

Key Benefits for Commercial Real Estate Investors

✔️ Larger Tax Deductions – Eligible property owners can claim deductions starting at $2.50 per square foot, with the potential to increase up to $5.00 per square foot if additional energy savings benchmarks are met.

✔️ Wider Eligibility – Previously available mostly to government-owned properties, the deduction now applies to private commercial buildings and certain tax-exempt entities, broadening its reach.

✔️ Reduced Operating Costs – Energy-efficient buildings consume less electricity and gas, which leads to lower utility bills and increased net operating income (NOI).

✔️ Sustainability & ESG Compliance – With growing investor and tenant demand for sustainable real estate, implementing energy-efficient upgrades helps meet Environmental, Social, and Governance (ESG) goals while improving property appeal.

✔️ Competitive Advantage – Properties with energy-efficient certifications and upgrades tend to attract higher-quality tenants and achieve higher occupancy rates in the long run.

What Types of Energy Improvements Qualify?

To claim the Section 179D deduction, properties must implement energy-efficient upgrades in the following categories:

Interior Lighting Systems – Installing high-efficiency LED lighting and smart lighting controls.

 

HVAC & Building Controls – Upgrading heating, ventilation, and air conditioning (HVAC) systems to reduce energy consumption.

 

Building Envelope – Improving insulation, windows, and roofing to enhance thermal performance and reduce energy waste.

To qualify, these upgrades must reduce a building’s total energy and power costs by at least 25% compared to a reference building. The greater the energy savings, the larger the tax deduction.

Who Can Benefit from Section 179D?

• Commercial property owners investing in building improvements.
• Real estate investors & developers upgrading their properties to meet modern energy standards.
• Architects & engineers who design energy-efficient commercial properties may also be eligible for deductions.
• Tax-exempt entities (such as non-profits and universities) that enter into partnerships for energy-efficient upgrades.

How to Claim the 179D Tax Deduction

1. Conduct an Energy Audit – Work with a qualified energy consultant to evaluate current energy use and determine eligible upgrades.
2. Implement Upgrades – Ensure improvements meet ASHRAE standards (industry benchmarks for energy efficiency).
3. Obtain Certification – Have your property evaluated by a third-party qualified professional to certify the energy savings.
4. File the Deduction – Work with a tax professional to ensure proper documentation and compliance when filing.

Final Thoughts from The Bill Gladstone Group

Energy-efficient properties aren’t just good for the environment—they save money, increase property value, and attract high-quality tenants. With the expanded Section 179D deduction, now is an excellent time for CRE investors and property owners to make strategic upgrades that lower costs and improve long-term returns.

At The Bill Gladstone Group, we specialize in helping investors navigate the evolving CRE market and identify properties with strong investment potential. If you’re considering energy-efficient upgrades or looking for commercial properties that align with sustainability incentives, contact us today to explore the best opportunities.

Commercial real estate (CRE) financing can be a labyrinthine endeavor, especially if you’re new to the game. From understanding different types of loan products to navigating the sometimes complex eligibility criteria, the process can be overwhelming. But fear not! With the right guidance and knowledge, you can secure the funding you need for your commercial property.

1. Understand Different Financing Options. Before diving deep, it’s essential to understand the myriad of financing options available:

• Conventional Bank Loans: These are the most common and usually come from traditional banking institutions. You’ll need a solid credit history and a considerable down payment.

• SBA Loans: The Small Business Administration offers two primary programs: the 504 and 7(a) loans. These can be more lenient with their requirements, especially for small business owners.

• Private Lenders can include private equity firms or individuals willing to lend. Their terms might be more flexible, but the interest rate could be higher.

• Bridge Loans: These are short-term financing options to “bridge” the gap between immediate financing needs and long-term solutions.

2. Your Credit Matters.

Your personal and business credit scores are critical in the financing you can obtain and the interest rate you’ll be offered. Make sure you review your credit report for any inaccuracies and work on improving your score if needed.

3. Location, Location, Location.

The location of your property can significantly impact your financing options. Lenders might be more willing to finance properties in prime locations or areas with high growth potential.

4. Consider Your Needs.

Are you looking for a short-term solution, or are you in for the long haul? Understand the purpose behind your financing needs. If you’re planning renovations, you might want a different type of loan than purchasing a fully finished building.

5. Shop Around.

Navigating the CRE financing world can be complex. Seek guidance from financial advisors, experienced colleagues, or industry experts. A knowledgeable partner can help you determine the best financing strategy tailored to your needs.

6. Seek Expert Advice.

Most commercial real estate loans will require a substantial down payment, sometimes as much as 20-30%. Plan and ensure you have the necessary capital before approaching lenders.

7. Plan for Down Payments.

Most commercial real estate loans will require a substantial down payment, sometimes as much as 20-30%. Plan and ensure you have the necessary capital before approaching lenders.

8. Understand the Fine Print.

Ensure you thoroughly understand a loan’s terms and conditions before committing. This includes understanding interest rates (fixed vs. variable), repayment terms, prepayment penalties, and associated fees.

9. Leverage Local Lenders.

Often, local banks and credit unions better understand the local real estate market. They might be more willing to finance community projects than larger national banks.

10. Stay Updated.

The world of CRE financing is continually evolving. Staying updated with industry trends, interest rate fluctuations, and new financing products can give you a competitive edge.

Navigating commercial real estate financing can be manageable. With the right knowledge and a robust support system, you can find the perfect financing solution to fit your needs. Remember, every successful real estate magnate was once a novice. With perseverance and knowledge, you, too, can master the nuances of CRE financing.

 

 

In recent years, we have witnessed several high-profile failures of large financial institutions, which has raised questions about the stability and sustainability of the banking industry. The reasons behind the collapse of big banks are complex, but there are some underlying issues that contribute to their downfall. In this blog post, we will discuss some of the key reasons why big banks are failing.

1. Excessive Risk-taking
One of the primary reasons why big banks fail is excessive risk-taking. Banks engage in a variety of risky activities, including trading complex financial instruments, making speculative investments, and lending to risky borrowers. In some cases, these risky activities can result in significant losses that can wipe out a bank’s capital and threaten its survival.

2. Poor Risk Management
Another factor that contributes to the failure of big banks is poor risk management. Banks must effectively manage their risks to avoid catastrophic losses. However, many banks have been found to have weak risk management systems, inadequate controls, and poor governance structures. When banks fail to manage their risks effectively, they can face significant losses that can threaten their survival.

3. Market Turmoil
Market turmoil is another factor that can contribute to the failure of big banks. Financial markets are inherently volatile, and sudden changes in market conditions can result in significant losses for banks. For example, the 2008 financial crisis was triggered by a collapse in the housing market, which led to widespread losses for banks that had invested heavily in mortgage-backed securities.

4. Regulatory Pressure
Regulatory pressure is also a significant factor that can contribute to the failure of big banks. Banks are subject to a range of regulatory requirements, including capital adequacy standards, liquidity requirements, and stress testing. Failure to meet these requirements can result in significant penalties and fines, which can impact a bank’s profitability and financial stability.

5. Technological Disruption
Finally, technological disruption is another factor that is contributing to the failure of big banks. Fintech companies are rapidly disrupting the traditional banking model by offering innovative products and services that are often more convenient and cost-effective than traditional banking services. As a result, many big banks are struggling to keep up with the pace of technological change, which can impact their profitability and long-term sustainability.

In conclusion, there are several reasons why big banks are failing. Excessive risk-taking, poor risk management, market turmoil, regulatory pressure, and technological disruption are all contributing to the challenges that big banks face. To survive and thrive in this rapidly evolving landscape, big banks will need to adapt their strategies, enhance their risk management systems, and embrace innovation to stay ahead of the curve.

 

By Joseph Larkin, CCIM, MCR, SIOR, SLCR

Cost Segregation And Bonus Depreciation

Investors are capitalizing on the recent tax laws changes using cost segregation and bonus depreciation to decrease initial investment and increase returns.

Increase Your Return On Your Real Estate Investment

A cost segregation study is a strategic planning tool that commercial and investment real estate owners can use to increase their cash flow, improve their tax position, and improve their overall after-tax return on investment.

These cost allocation studies assess a taxpayer’s real property assets and identify a portion of those assets that can be treated as personal property. By segregating personal property from the real property, the study reassigns costs that would have been depreciated over a 27.5-year or a 39-year period to asset groups that have a shorter cost recovery life. Once this is done, the accelerated cost recovery may, under certain circumstances, be expensed immediately.

On average, 20% to 35% of a real estate investment may be reclassified into a tax class lives of 5-, 7-, or 15- years. This means much larger tax deductions for cost recovery are available in the early years of the investment than otherwise would be available with straight line depreciation over 27.5 for residential or 39 years for nonresidential. This can result in a substantially lower tax liability an increase in after-tax cash flow and return.

Recent tax law changes made two simple modifications to bonus depreciation, that will make cost segregation studies more valuable to long-term ownership of commercial and investment real estate. Real estate that has been placed in service after September 27, 2017 is eligible for 100% bonus depreciation treatment through tax year 2022.

Bonus depreciation is a tax incentive that allows individuals and businesses to immediately deduct a certain percentage of their asset costs the first year they are placed in service rather than deducting them over the “useful life” of that asset. This bonus depreciation, which is also referred to as “additional first year depreciation deduction,” allows the real estate investor to increase their tax deductions thus increasing their after-tax return.

Unlocking The Equity In Your Real Estate And More

Any assets that are reclassified as personal property will be eligible for bonus and can be immediately expensed in the first year. This means that an investor acquiring an investment property and performing a cost segregation study may have a lower initial investment because of the tax savings during the year of acquisition.

Consider The Following Example:

A taxpayer purchases a building for $5 million. After performing a cost segregation study, the study reclassified 20-percent of the acquisition cost to be personal property. By assigning these assets a shorter depreciable life, the taxpayer could apply bonus depreciation and write off $1,000,000 of the $5 million purchase price in Year 1. A taxpayer in a 25 percent marginal tax bracket would save $250,000 in taxes, or 5-percent of the purchase price.

Now is a good time to evaluate all your real estate assets. A cost segregation study does not have to occur in the year of the acquisition. The study could be performed on a property placed in service in a prior year where a tax return has already been filed. This is known as a look-back study.

A look-back study allows you to claim a catch-up depreciation tax deduction. The catch-up, taken in a single year, is equal to the difference between what was taken a depreciation and what could have been taken as depreciation if a cost segregation study had been performed. The IRS allows taxpayers to use a cost segregation study to adjust depreciation on properties placed in service as far back as January 1, 1987.

There are drawbacks to the use of a cost segregation study. On disposition, any asset that is converted to personal property will not qualify for 1031 exchange and maybe subject to tax at the taxpayer’s ordinary income tax rate. In addition, all cost recovery that is taken is subject to recapture. All cost recovery take is subject to recapture tax.

Almost all taxpayers that plan to hold their commercial and investment real estate over the long run can benefit from a cost segregation study. A cost-benefit analysis of the study should be completed by a competent professional along with a comprehensive review of your individual tax situation with your tax advisor.

Cost segregation can reduce the owner’s income tax liability, increase the property’s cash flow, and enhance the after-tax internal rate of return that the property generates. To help with the analysis, the investor should engage qualified professionals with expertise in this, to help them decide if the benefits will outweigh the costs.

 

By Joseph Larkin, CCIM, MCR, SIOR, SLCR

Where possible, many companies are currently capitalizing on their real estate equity. One of the most powerful ways a company can create value is by employing the strategic and sophisticated use of the sale-leaseback transition.

The sale-leaseback strategy was originally used as a financing transaction when the real estate market lacked adequate access to capital at reasonable rates. It provides the opportunity for a company to cash out the equity in its real estate and convert it to cash to finance its core business activities, reduce debt, and/or expand operations.

Companies that purchased real estate for their business many years ago may have a large amount of equity in their real estate holdings. Converting the equity into cash may provide a company the opportunity to reinvest the equity back into the business, reduce debt, or acquire a competitor through a leverage buyout or a merger and acquisition.

With a typical sale-leaseback structure, a company sells its operational real estate to an unrelated private investor or an institutional investor. Simultaneously with the sale, the company leases back the property from the investor, typically for 10 to 20 years.

The company usually receives more cash with a sale leaseback than through conventional mortgage financing. For example, if the transaction includes both land and improvements, the seller receives 100% of the property’s market value (minus any capital gains tax). In comparison, conventional mortgage financing normally funds no more than 65 to 75% of a property’s value.

Typically, the initial lease term can be structured for a period that meets the company’s needs without the burden of balloon payments, call provisions, refinancing, or the other issues of conventional financing. Moreover, the seller avoids the substantial costs of conventional financing such as points, appraisal fees, and some legal fees. Options to renew the lease also may be negotiated, extending the occupancy period.

From the perspective of the company, converting the equity in the real estate into cash and deploying the cash into operations could generate a higher return than keeping the equity in its real estate. The elimination of any mortgage debt on the real estate also can improve the company’s financial statements.

From an accounting standpoint, depending on the book value, the true market value of real estate is not reflected on the balance sheet. The sale-leaseback transaction places the cash received from the sale on the books as a short-term asset and removes the real estate as long-term capital asset at the book value (typically below market value) from the balance sheet. This conversion of the equity into cash would reflect the true value of the asset, now cash. This could have a dramatic impact on the balance sheet and, more importantly, the company’s financial ratios.

From a tax standpoint, when converting the company from an owner to a tenant, you’re allowed to effectively depreciate the land as lease payments to cover the use of the land and the building. If you own the property, you can’t depreciate the land. Those lease payments are fully tax deductible.

There are some drawbacks to this strategy: the sale of real property may trigger a capital gains tax and, under GAAP, the lease will be “booked” as a long-term liability. Based on the lease structure, the lease payments may be straight-lined or amortized.

The company’s decision to complete a sale-leaseback transaction may be based on a variety of after-tax analysis. For instance, comparing the return on the deployment of capital in the business, using an after-tax weighted average cost of capital, to the return on the equity if the company continues to own its real estate.

This strategy may provide a business with an exit strategy to sell the going concern (the business) and the real estate separately. By partitioning the real estate from the business, the parts may be worth more than the whole, allowing for the sale of the business individually and capitalizing on the individual values.

The investor benefits from having a financially bankable tenant who already occupies the space then enjoying the security of a stable, long-term income stream. The lease is structured as an absolute net, which provides the benefit of eliminating most of the property management responsibilities and capital investments. The type of lease and terms are negotiated at the outset.

The investor’s evaluation of the sale-leaseback transaction starts with the tenant’s credit. Moreover, investors use a variety of performance measurements such as capitalization rate; internal rate of return, both before- and after-tax; capital accumulation modeling and financial management rate of return.

The sale-leaseback strategy provides an alternative to ownership, which is leasing. “You don’t need to own your real estate but control it” through a well-structured lease. The evaluation of the sale-leaseback transaction has many integral parts for both the company and the investor. When properly structured, it is a win-win situation for both.

Of course, it is important to have an experienced and knowledgeable commercial real estate team working with you as you consider this option.

By Jeff Thomas

The U.S. Congress’ right to impose the federal income tax was established when the 16th Amendment to the Constitution was ratified on February 3, 1913. Since then, many new federal tax laws have been enacted for economic, social, or political reasons. Some tax laws raise tax rates and some offer tax credits, while others are meant to provide support for a candidate’s re-election. Over the years, many new tax laws have been met with discontent, nonsupport, and a push to have the new law modified or overturned. Such is not the case with the Opportunity Zone Program included in the Tax Cuts and Jobs Act of 2017. Since it began on January 1, 2018, the Opportunity Zone Program has been very well received, as it provides both business owners and investors the ability to achieve substantial federal tax savings.

The stated goal of the Opportunity Zone Program is the use of capital gains realized by business owners and investors to revitalize certain lower income communities. Congress estimated that at the end of 2017 there were at least $2 trillion of unrealized capital gains that could be used for the Opportunity Zone Program. The program allows capital gains to be invested in businesses in one or more of an estimated 8,700 designated Opportunity Zones, offering taxpayers temporary and permanent tax deferral as a reward for helping to revitalize economically challenged communities. This is truly a win-win proposition.

Opportunity Zone Program basics

Businesses located within an Opportunity Zone will be funded with an equity investment from a self-certified entity known as a Qualified Opportunity Fund. Qualified Opportunity Funds are derived via the investment of capital gains generated by a proprietor, friends and family, or other outside investors. Realized capital gains must generally be invested in a Qualified Opportunity Fund within 180 days; however, additional flexibility exists for gains passed through from flow-through entities, including partnerships, and certain gains from the sale of assets used in a business.

Gains eligible for investment

All long-term and short-term gains are eligible to be reinvested in a Qualified Opportunity Fund. This includes gains from the sale of investments (stocks, bonds, and/or real estate), the sale of business assets, and the sale of a personal residence, art, automobile, and other personal property. The eligible Qualified Opportunity Fund must be a domestic entity classified as a corporation or partnership for tax purposes. It must be formed for the purpose of investing in an Opportunity Zone business. The Qualified Opportunity Fund must self-certify using IRS Form 8996.

A beneficial example

Jane Bizowner sold her business on June 1, 2019, for $150,000. Jane’s tax basis in her business was $50,000, so Jane realized a capital gain of $100,000. Jane could simply include the capital gain in her 2019 taxable income and pay federal and state tax on the gain on or before April 15, 2020. However, if Jane invests the $100,000 capital gain in a Qualified Opportunity Fund within 180 days of June 1, she can enjoy the benefits offered by the Opportunity Zone Program. Joan gets to keep, on a tax-free basis, the $50,000 of cash that equals her tax basis in her business. Joan can then elect on her 2019 federal tax return to defer the tax on the gain for up to seven years. The Qualified Opportunity Fund into which Jane invests her $100,000 capital gain will make an equity investment in a business located in a Qualified Opportunity Zone.

After five years, Jane will receive a 10% ($10,000) step-up in basis, reducing her taxable gain to $90,000. The tax on the gain remains deferred. After another two years, Jane will receive an additional 5% ($5,000) step-up in basis, reducing her taxable gain to $85,000. On December 31, 2026, the deferred tax on the reduced taxable gain of $85,000 is due and is payable on April 15, 2027. Jane has achieved a seven-year deferral and a reduced tax on her original $100,000 capital gain. And now for the really good news …

No federal tax on Fund investment

If Jane does not dispose of her investment in the Qualified Opportunity Fund for at least 10 years and then sells it for a gain, there will be no federal and possibly no state tax on the gain. The appreciation on Jane’s interest in the Qualified Opportunity Fund permanently escapes federal and possibly state taxation. Just think: If Jane invests in the next Microsoft or Google, she would save millions in taxes. To take full advantage of the Opportunity Zone Program’s tax benefits, investments of realized capital gains into Qualified Opportunity Funds should be made by December 31, 2019. However, the Opportunity Zone Program is not scheduled to terminate until the end of 2047. Therefore, investments made by December 31, 2037 are eligible to be disposed of on a no-tax basis.

A golden opportunity for businesses

The Opportunity Zone Program offers new businesses located in an Opportunity Zone the ability to be funded with tax-deferred equity dollars. The owners of the new business also will gain the possibility of tax-free appreciation after 10 years.

Pre-existing businesses can form new companies (subsidiaries/affiliates) and locate them in Opportunity Zones. The new companies can then meet the Opportunity Zone requirements and take advantage of the available tax-deferred and tax-free benefits.

If a business buys property in an Opportunity Zone and that property had been previously placed in service, then the business must invest 100% of the existing basis in improvements over a 30-month period. No reinvestment is necessary if the property was vacant for five years or if the property is leased. Leasing space in properties that were previously placed in service and are located in an Opportunity Zone is a very good way for an Opportunity Zone business to avoid having to make substantial investments in its Opportunity Zone property.

The fine print

A qualified Opportunity Fund must hold at least 90% of its assets in Qualified Opportunity Zone property. This includes certain stock or partnership interests of the underlying business and/or business property (personal and/or real property) of a Qualified Opportunity Zone business. Testing for the 90% threshold is performed every six months.

Substantially all of the tangible property owned or leased by an Opportunity Zone business must be Qualified Opportunity Zone property, located in the Opportunity Zone. Proposed U.S. Treasury regulations define substantially as 70% or more. At least 50% of the gross income must be derived from the active conduct of the business within the Qualified Opportunity Zone. Proposed Treasury regulations are available to guide an Opportunity Zone business owner and enable them to meet the requirements of the 70% and 50% tests.

A bright future

Billions of capital gains have already been invested in Qualified Opportunity Funds. Real estate and business deals are closing quickly in many Opportunity Zones. At first blush, it appears that the Opportunity Zone Program will be a success and many blighted areas will be returning to their former glory. Additional taxpayer-friendly Treasury regulations are expected by year’s end and these should make the program even more beneficial.

Disclaimer: The information presented here has been prepared for general guidance on matters of interest only and does not constitute professional advice. You should not act upon the information presented here without obtaining specific professional advice. No representation or warranty is given as to the accuracy or completeness of the information. You should also be aware that additional Treasury regulations are due to be released to further clarify the Opportunity Zone Program provisions of the Internal Revenue Code.

By Orlando Maldonado

All couples can benefit from having a conversation about retirement. Merrill Lynch Wealth Management shares tips on how to put a plan in place to pursue your goals.

Difficult financial decisions are common on your way to retirement. Questions about Social Security, Medicare and how best to draw down retirement assets are just some of the topics to discuss with your partner. But before you begin these discussions, it is important to have a more personal conversation about each other’s goals for retirement; this will help to guide the decisions you make for the next stage of your life.

Use this checklist to get the conversation started and be sure to make it a yearly tradition to revisit your plans together.

1. Will we retire at the same time?

Many couples find this to be one of the hardest questions to answer. One of you may be looking forward to winding down a satisfying career, while the other is still enjoying the pace of full-time work.
“Statistically, women tend to live five years longer than men,” says Karen Burns, head of the Goals Based Consulting Group at Merrill Lynch. “Particularly when a wife is the younger spouse, there may be good reason for her to keep working a while longer so that she will not outlive their retirement savings.” Having one spouse work longer may also make it possible for one or both spouses to delay claiming Social Security benefits — a choice that can increase the size of your benefit and entitle your spouse to a larger survivor’s benefit.

2. How will we spend our days?

Decisions about travel, family time and other retirement pursuits are as individual as the couples who make them. But different choices carry different price tags, so it is important to at least have a broad outline of how you want to spend your time together. “Try making a list of retirement objectives with your spouse each year,” Burns suggests. As you get closer to retirement, “have some long talks with your spouse to work out the differences between your two lists and figure out a plan for accommodating each of your most important priorities,” she says.

3. Where will we live?

Your choice will most likely have a major impact on your retirement finances. Downsizing from a house to a condominium could free up cash to bolster your savings and might also reduce outlays for property taxes and upkeep. Houses age too, and if you keep the family home, its maintenance needs are likely to increase. On the other hand, relocating could boost — or lower — other expenses. State income taxes and local property taxes, as well as the overall cost of living, can vary widely by location. For example, Alaska, Florida, Nevada, South Dakota, Texas, Wyoming and Washington have no state individual income tax — though some impose other levies, such as Washington’s state estate tax.

4. Whose investing style will we follow?

During your working years, you and your spouse may have managed your own 401(k)s and IRAs in line with your individual investment preferences. That does not have to change as you move into retirement, but it is important to work with your financial advisor to coordinate an overall portfolio that serves your mutual goals. As Americans live longer, it is also “increasingly important to continue to explore investment strategies that will help your portfolio continue to grow even as you begin to draw down on it,” says Debra Greenberg, a director in the Personal Retirement Solutions Group at Bank of America Merrill Lynch.

5. Will we leave our money to the kids or to charity?

If you have arrived at this question, it means that you have worked through the basic issues, but it may still inspire passionate conversation. For couples who may not see eye to eye on sharing their wealth with their kids, a multigenerational health and education exclusion trust (HEET 1), could be the answer. This type of trust is designed to see to it that children and future descendants will not have to worry about medical or college costs. Paired with a fund for each child to cover emergencies or retirement, it can ensure that children are provided for while still allowing you to give a portion of your estate to charity.

Any information presented about tax considerations affecting client financial transactions or arrangements is not intended as tax advice and should not be relied upon for the purpose of avoiding any tax penalties. Neither Merrill Lynch nor its financial advisors provide tax, accounting or legal advice. Clients should review any planned financial transactions or arrangements that may have tax, accounting or legal implications with their personal professional advisors.

This material should be regarded as general information on Social Security considerations and is not intended to provide specific social security advice. If you have questions regarding your particular situation, please contact your legal or tax advisor.

Bank of America Merrill Lynch is a brand name used by several Bank of America Corporation businesses, including, but not limited to, Retirement and Philanthropic Services. Bank of America Corporation is a financial holding company that, through its subsidiaries and affiliated companies, provides banking and non-banking financial services.

Merrill Lynch makes available products and services offered by Merrill Lynch, Pierce, Fenner & Smith Incorporated (MLPF&S) and other subsidiaries of Bank of America Corporation.

Investment products:
Are Not FDIC Insured
Are Not Bank Guaranteed
May Lose Value

MLPF&S is a registered broker-dealer, Member SIPC and a wholly owned subsidiary of Bank of America Corporation.
© 2018 Bank of America Corporation. All rights reserved. ARWMM8PF

[1] A HEET is a trust created during life or at death to which none of a donor’s generation-skipping transfer (GST) exemption is allocated, but the funds may be used for education and medical expenses of grandchildren and more remote descendants paid directly to the educational institution or medical provider.

By Laura Potthoff

Many Pennsylvania counties have a local economic development agency charged with promoting and advancing economic opportunities, leveraging community assets, providing a strong economic base, and growing the economic viability of the county or region they represent.

Working with a local economic development agency can assist expanding and start-up businesses by bridging the gap between private investment and total project costs through low interest rates, fixed terms, and low down payments. With access to federal, state, and internal loan programs, economic development agencies can help with the financing of real estate acquisition and renovations, working capital, and equipment purchases.

Cumberland Area Economic Development Corporation (CAEDC) is the designated economic development agency in Cumberland County, Pennsylvania. If you are launching or expanding your business to this area—the fastest growing county in the state—there is a variety of low-interest loans and grant programs available to help you get started.

Small Business Administration (SBA) 504 loans provide long-term, fixed rate, low-equity economic development financing for small businesses to acquire, improve, or construct real estate, and/or purchase major fixed assets for expansion.

Growing companies often look to conserve cash to solidify their working capital position for the long run, but growth often requires down payments on capital purchases for real estate and equipment needs. Fortunately, SBA 504 financing offers companies expanding an existing facility or acquiring a property the opportunity to finance the majority of their capital project costs.

SBA 504 financing is performed in conjunction with a bank partner and requires a minimum 10% equity injection. However, a company’s real estate “as-is” appraisal valuation less its current outstanding mortgage balance can count toward the equity injection if the new project is taking place at the current facility or on an adjacent property. In such a case, the typical financing structure is shifted upward. For example, this could mean the bank finances about 55% of the new project and the SBA 504 loan finances the remaining 45%.

SBA 504 CASE STUDIES:

Midway Bowling Center in Carlisle received a $257,000 investment through the SBA 504 loan program for renovations, including a new bar area, restored lanes, new gaming tables, and a shuttle bus. Midway Bowling has been in business since 1957.

CAEDC assisted with a $1,610,000 investment through the SBA 504 program for SPAtacular Escapes and The Carlisle Group. The loan was used to acquire land and construct a new office space for The Carlisle Group, along with opening the new SPAtacular Escapes wellness spa and salon in Mechanicsburg.

Warrington Farm Meats received a $595,000 investment through the SBA 504 program to expand their butcher shop and processing facility in Dillsburg. This funding was made available because they have a farm in Cumberland County.

Pennsylvania Industrial Development Authority (PIDA) loans provide low-interest financing for land and building acquisition, machinery and equipment, working capital, and energy-efficient projects. Applications for PIDA eligible projects in Cumberland County need to be submitted through CAEDC. PIDA loan benefits include a low interest rate and the opportunity to cover up to 50% of the total project cost.

PIDA CASE STUDIES:

CAEDC assisted Eleven Oaks with a $227,500 PIDA loan to acquire farmland to grow their Wagyu Beef business in Newville. Due to the high demand for the beef, the farm needed to grow its herd size in a sustainable and healthy manner.

Classic Drycleaners & Laundromats worked with CAEDC to secure a $200,000 PIDA loan for energy-efficient upgrades to their machines at their Carlisle location. Due to the energy-efficient upgrades, the Classic team was able to achieve another success through a $54,600 rebate from UGI Utilities.

CAEDC also has access to a variety of internal loan programs that benefit energy-efficient projects, tourism-related businesses, and small business expansion projects. These internal programs benefit businesses by offering interest rates as low as 2% and bridge the gap to help projects that would otherwise not be possible.

CAEDC’S INTERNAL LOAN CASE STUDIES:

CAEDC assisted Wheelhouse Properties with energy-efficient renovations through a $158,000 loan through the Cumberland Revolving Energy Loan Fund (CRELF). The former Carlisle Tire & Wheel building, located at 632 N. College St., Carlisle, was completely renovated into high-end apartments.

Oven Industries, located in Mechanicsburg, received a $95,000 investment through a Community Development Block Grant (CDBG) to purchase conformal coating equipment to protect circuit boards to broaden and strengthen its manufacturing capabilities in the aerospace and defense markets.

CAEDC invested $150,000 through the in-house Tourism Infrastructure Loan Fund (TILF) to fund equipment purchases for the VRAI restaurant in Lemoyne.

CAEDC’s tourism product development, sales, and marketing grants are available to businesses looking to increase tourism to Cumberland Valley or enhance the visitor experience. The Tourism Product Development Grant is a rolling, matching funds program that can be used for the development of thematic trails/tours, technical assistance, and asset, event, or meeting/conference expansion or development.

Eligible projects can include: experiential collateral printing and distribution; professional photography, videography, and website design; advertising for major attractions, events with 500+ attendees, or to promote overnight stays; signage for historical, outdoor, or major attractions and/or promotional signage and tradeshow support including early-bird registration to tourism shows.

CAEDC has assisted more 130 projects through its sales and marketing grant programs.

TOURISM GRANT CASE STUDIES:

CAEDC assisted the Carlisle Sports Emporium with a $76,000 Tourism Product Development Grant for the addition of a new meeting venue, The Barn at Creek’s Bend. The historic renovated barn will accommodate up to 300 people on the main floor, 190 on the lower floor, and another 300 on the deck.

The Winery at the Long Shot Farm received a $74,550 Tourism Product Development Grant from CAEDC. The grant is for the addition of a tasting room to this farm winery located just north of Carlisle. The Winery at the Long Shot Farm is Cumberland County’s first winery with its own vineyard, offering estate bottled wine.

These are examples of programs available in Cumberland County. Local economic development agencies throughout Pennsylvania and across the country offer access to a variety of financing opportunities to support new and growing businesses. Contact your area agency to explore the options available to help your business grow and thrive.