Business Owners Get Helping Hand From The SBA 504 Loan Program

When Alan White purchased a truck accessories business last year, he had an option to buy the building as well. But coming up with the 30 percent down often required for a commercial loan was more than White could manage from a brand new business.

If he waited, White feared Lee County's soaring real estate prices would push the building out of his reach in no time.

White is one of dozens of Lee County small business owners who have found the answer this year in a program that combines a loan from a private bank with a loan arranged by Florida First Capital Finance Corporation (FFCFC) and backed by the U.S. Small Business Administration. The program (SBA 504 loan program), allows the private bank to make a loan for about 50 percent of the cost, while FFCFC, a nonprofit development company, makes a loan backed by an SBA loan of 40 percent and the business owner comes up with 10 percent. The interest rates are fixed, are at below market rates and terms are up to 20 years.

“The loans are typically used for real estate, but can also be used for the purchase of heavy equipment. The loan program has been in place in one name or another for over 20 years, but is sparking renewed interest as property values and interest rates begin to rise”, said Steve Aronson, Vice President of FFCFC and Business Development Officer for the company in Southwest Florida.

Eleven such loans were made in 2004 to small business owners in Lee County for projects totaling $20.9 million. So far in fiscal year 2005, which started Oct. 1, there have been 13 such loans in Lee County for projects totaling $21.3 million. Nationwide, more than $2 billion has so far been issued through 504 loans, compared with $1.8 billion during the same period last year, an increase of 12 percent.

"One of the reasons this program works so well is that it is a very neat balancing of interests," Aronson said. "You don't want to do anything that drives private industry out of the market and this actually helps make the private bank a partner with a much lower risk because they are only underwriting 50 percent."

White, the owner of 4x4's & More in Ft. Myers, closed on the loan to buy his shop and service buildings a few weeks ago. "Buying land and buildings is a good investment in this market," White said. "With the way property values are going up, you have to take the opportunity when you can."

By keeping his down payment at 10 percent, White said he has been able to keep more cash on hand to fuel his business. The company has eight employees. "You can use your money to build your inventory and that increases sales," White said. "It takes a couple of years to get a business on its feet, but this helps."

In another 504 success story, Steve Pietrzyk was referred to the program by his bank and Steve Aronson when he was unable to come up with the needed down payment to buy a 4,000-square-foot warehouse and office space on Canal Street in Fort Myers. "As a new business owner, most banks aren't going to talk to you unless you have been in business for a couple of years and then they still want 30 or 40 percent down," Pietrzyk said. "I was looking at this warehouse and there were literally people walking outside the fence, taking down the number because they wanted it. The Realtor said I had to get it under contract. I know people in business who have worked their whole lives and don't own their own building and I have mine in the first year," he said. "I know that part of my business is taken care of."

Pietrzyk owns Tour Greens Florida, which provides landscape maintenance services to apartment and condominiums, plus builds synthetic putting greens for businesses and homes. The business has 14 employees. He bought the building for $375,000.

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