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504 LOAN PROGRAM The Choice for Savvy Lenders

Mar 2008

It's not hard to find reports in the news these days of the economy in a downturn, the commercial real estate market in a slowdown and credit becoming harder to obtain. In fact, according to recent Fed data many lenders, nervous about the economy and more risk averse, have increased their credit standards for small business loans.

Despite this news, the buying and selling of commercial real estate continues. And the need for affordable commercial credit remains, although the standards that define those terms have tightened significantly.

But not all is doom for credit-worthy borrowers seeking loans on reasonable terms for the purchase of owner-occupied commercial property. And not all is gloom for savvy lenders seeking ways to stay competitive in a transitional marketplace.

“The fact is, there are more lenders today fighting for fewer credit-worthy borrowers,” said Lamar Nash, FFCFC senior vice president. “The 504 loan program provides lenders with a competitive edge thanks to its distributed credit structure which allows lenders to offer affordable rates and terms while mitigating risk to retain a strong portfolio.”

Under the 504 program, lenders get a 50% loan-to-value first lien on the asset purchased. Florida First Capital provides SBA-backed financing up to 40% of the project cost, thus providing liquidity to the program.

For the borrower, the down payment is limited to as little as 10%. Maturities are fixed for 10 or 20 years and fees and other soft costs associated with the loan are financed in the loan.

Eligible projects under the 504 program include for-profit small businesses desiring to purchase real estate and improvements; construct new or renovate existing facilities; and/or purchase long-life machinery and equipment.

“Minimizing risk is at the forefront of credit decisions these days. Lenders are finding the 504 program valuable in saving loans that their underwriters otherwise would not write,” said Nash.

For example, James, a Florida commercial banker, has successfully embraced the 504 program over the past year to overturn a steadily declining approval rate for his credit requests.

“The small business owner seeking to expand in this current economic climate is looking for his best deal possible. The low risk-to-value nature of 504 transactions allows me to attract credit worthy borrowers and strengthen loan production numbers,” said James.

For more information on the FFCFC 504 loan program, visit www.ffcfc.com or call 888.320.5504.