Attention lenders:  don’t let common roadblocks get in the way of approving good deals.   Remove the barriers by partnering with the SBA 504 Loan Program.  For instance, check out some of the solutions the 504 Loan Program can provide:

Barriers

504 Solution

Liquidity Issues

  • 90% financing
  • loan can include soft costs, closing costs and equipment
  • fully amortized for the life of the loan
  • equity in land (if already purchased) can count toward down payment

Special Use Property

  • 85% financing for special-use
  • no limit on total loan amount
  • can finance land, real estate, construction, expansion, renovation and equipment/furnishings

Higher Risk

  • 50% LTV
  • first lien position
  • if new business, projections taken into consideration
  • participation with SBA enhances the credit
  • bank sets pricing for its first mortgage
  • reduces concentration issues

The SBA 504 is a smart way to differentiate your bank from its competitors.  With SBA 504 loans, banks can:

Mitigate Credit Risk

Lenders have first lien position and typically a 50% loan-to-value ratio, minimizing collateral risk

Manage Lending Limits and Industry Exposure

Smaller banks can entertain larger projects, while larger banks can limit their exposure to certain industries and borrowers.  A bank can also reduce a commercial real estate concentration and avoid regulatory scrutiny.

Diversify Customers

The presence of SBA 504 loans in a bank’s portfolio leverages lending capacity across more borrowers and diversifies the bank’s default risk.

Attract and Retain New Customers

Because SBA 504 loans are designed to finance growth companies, they can be the basis of a long banking relationship when that entrepreneur places their deposits in your bank and returns for additional business financing as their company grows.

Strengthen Earnings

The bank sets the pricing on its first mortgage loan.  Plus, 90% financing means more of the borrower’s dollars remain on deposit.  The bank also earns fees and interest on the interim loan.

Earn CRA credits

Banks that participate in the SBA 504 Loan Program are eligible for Community Reinvestment Act credits on certain projects.

Enhance Community Image

A bank that demonstrates support of its local small businesses is also showing support for the economic development of its community.

 

When clients come in looking to purchase owner-occupied commercial real estate, the SBA 504 is the best option.  Feel free to use download our SBA 504 Commercial Buyer Guide when discussing the program with clients as it provides a simple and straightforward outline of the 504 Loan Program including the borrower benefits, qualifiers and a project case study.