Pub. 16 2019 Issue 4

Issue 4 • 2019 11 O V E R A C E N T U R Y : B U I L D I N G B E T T E R B A N K S — H E L P I N G N E W M E X I C O R E A L I Z E D R E A M S UTILIZING THE SBA 504 LOAN PROGRAM When I first started in this industry in 1997 — if my memory serves me correctly — rates were about 9%. Back in December 2012, the SBA 504 loans funded at 4%. I would never have imagined that the rates would be sub 4, and yet here we are! We all know that our commercial loan clients are always looking for the lowest rate, fixed for as long as possible. When speaking with your customers, please keep the SBA 504 Loan Program in mind. While I’m seeing very competitive rates from my lending partners, by utilizing the SBA 504 Loan Program, your customer can still manage their rate risk with a fixed rate on 30% to 40% of their financing for 10, 20 or 25 years. I’d like to remind the readers that yes, the SBA 504 Loan Program is to assist small businesses with their financing needs, but the projects we finance range anywhere from as little as $150 thousand up to $12.5 million. This translates into SBA participation at $60 thousand up to $5 million, respectively. If the custom- er is a manufacturer, the SBA portion of the loan can be as high as $5.5 million. Additionally, if you have a client who operates from multiple locations, we have the ability to finance multiple locations, not to exceed the $5 million in SBA dollars. By participating with the SBA 504 Loan Program, the customer’s equity contribution can be as little as 10%, which is appealing to small business owners. If they have been in business more than two years, the equity contribution can be as little as 10%. Based on the project sizes in my previous paragraph, the equity contribution would be $12 thousand or $500 thou- sand, respectively. Keep in mind, if the project is for a startup business (in business two years or less) or a special-use property, the equity contribution increases to 15%. If a project meets both the criteria of a startup and a special use property, the equity contribution increases to 20%, which is the maximum amount re- quired when participating in the 504 Loan Program. As you are talking to your customers, please keep in mind that it isn’t necessary that you know all of the eligibility requirements and policies of the SBA 504 Loan Program. The experienced staff at Capital CDC is available to help you navigate through the entire process. At the onset, Capital CDC is available to quickly determine eligibility and prepare a “Sources and Uses of Funds” for your customer. This docu- ment provides the customer with the understanding of the structure of their loan, the SBA fees, and what their projected debt service will be if they obtain SBA 504 Loan Financing. We also have the capability to provide them with a prepayment premium estimate if that is also a concern. Lastly, if you have a long-time small business cus- tomer who is nearing your lending limit or policy limit that can be loaned to any one customer, you can utilize the SBA 504 Loan Program to assist you in keeping them within your limits. n A s I write this article, SBA 504 loan rates are at historic lows! SBA 504 loans that f unded in Januar y 2020 received a rate of 3.714% for 25 years, 3.644% for 20 years, or 3.804% for 10 years. By Lorena Chavez, Capital CDC