Forget everything you've ever heard about the U.S. Small Business Administration (SBA). The negative connotations may have been warranted in the past, but the SBA is different these days. The SBA is worth every penny of its more than $22 billion budget on the basis of a single program alone: the SBA 504 Loan Program for small business owners who want to acquire or develop their own facilities.
In fact, SBA 504 loans may rank as one of the most effective domestic economic development programs the federal government administers.
Lots of entrepreneurs ?? and far too many bankers, ironically ?? dismiss the SBA on the basis of its 7(a) lending program that always seems to need supplemental appropriations by the U.S. Congress.
The 7(a)'s reputation may or may not be deserved, but some of its negativity has managed to soil other truly effective SBA programs.
SBA 504 loans, by contrast, are a dynamo. They work; they work well; and unfortunately by some of the historical problems in the SBA's 7(a) program, a dark shadow has been cast over 504 loans causing not many people to know about them.
In fact, for too long, I have heard many otherwise knowledgeable lenders dismiss SBA 504 loans based on faulty and out-dated information.
I've been providing SBA 504 loans for more than eight years. Over two years ago, I founded Mercantile Commercial Capital, LLC to focus exclusively on providing 504 loans, and we're still the only lender nationwide to primarily do this. To date, we've closed more than 60 loans worth a total of more than $67 million in only 30 months of business. We offer other financing options too, but SBA 504 loans are by far our most popular and most rewarding program.
So far, every qualified 504 loan proposal we have submitted to the SBA has been approved and funded, or is soon to be funded.
The SBA knows the 504 is a hot property. Funding has grown about 22 percent a year since 2000. Last year, 504 loans helped fuel about $10 billion in total capital investments for 8,000 small businesses throughout the U.S. In fact, these loans helped create about 75,000 new jobs last year through the "equity savings" small business owners experienced.
Entrepreneurs, real estate brokers and accountants are gradually waking up to the fact that 504 loans were designed to level the playing field for small businesses in the marketplace. With 90% loan-to-cost financing of most commercial real estate projects, 504 loans are very powerful.
For the borrower, SBA 504 loans offer long-term, below-market, fixed-rate financing at better terms than are available from any private sector lender. And if that wasn't good enough, borrowers generally put half as much money down for 504 loans, which enable them to grow their businesses a lot faster. For every $50,000 of SBA guaranteed funds, small business owners need to create or retain one job in the next two years. It is in this way that 504 loans have become an engine for economic growth in America.
Lending amounts are generally not capped or limited and only non-public, for-profit businesses qualify. Three financial qualifications, however, set some limits: the borrower's small business must have a tangible net worth under $7 million; the operating company's net income for the previous two years must average less than $2.5 million annually; and the borrower cannot have liquid, non-retirement assets greater than the total project amount.
Most small businesses have no trouble meeting these qualifications. In fact, over 98 percent of all businesses in Florida, for example, qualify for SBA 504 loans.
What sorts of businesses make the most appropriate SBA 504 loan candidates? We see an extraordinary number of service professionals (physicians, attorneys, accountants, etc.), and we also finance plenty of franchisees, manufacturers and distributors. But in truth, any business with a track record or at least some solid, related experience is an appropriate SBA 504 loan candidate. The 504 Loan Program collateral requirements are generally limited to the commercial real estate facility that the loan finances, and approvals and closings happen in days and weeks, not in multiple-months as it was in the past.
Historically, the SBA was usually considered a lender of last resort. But compared to ordinary commercial financing, 504 loan terms and conditions are so good that for almost every small business, an SBA 504 loan should rank as their top choice.
Bankers have any number of reasons they've dreamed-up why not to consider SBA 504 financing and, to be candid, I'm okay with that. It just means we'll be here to help a lot more small businesses grow with our focus on the SBA's savviest program: 504 loans.
* * *
www.mercantilecc.com
Chris Hurn is President and Chief Executive Officer at Mercantile Commercial Capital, LLC, a leading provider of SBA 504 loans for business owners.
Chris actively participates in, among other things, the business development, underwriting and marketing functions of MCC. Previously, he worked as a senior management consultant, financier and executive with companies such as GE Capital, Heller Financial and NAI Realvest Partners. He has advised, financed and helped many small to mid-sized businesses throughout Florida and the Northeast for over ten years.
housekeepers near Buffalo Grove ..Those who are in the pressure washer business should not... Read More
Most doctors never distinguish the difference between customers and patients.... Read More
In franchising an individual desirous of their own business will... Read More
Many self employed professionals find themselves overwhelmed, frustrated, and confused... Read More
Shopping for a franchise is easy if you know what... Read More
Unfortunately for all buyers, each selling organization and their individual... Read More
When should you create a foundation in order to solidify... Read More
$37.4 million funded from venture capital today. $86.4 million funded... Read More
You need to be visible to attract customers, right? But... Read More
Attorneys and Lawyers are ruining the franchise industry. It is... Read More
How do you sponsor an event and get personal introductions... Read More
One of the primary concerns all small businesses have is... Read More
Having their own business is something many millions of people... Read More
A Brilliant Marketing Idea... sounds great but what is it?... Read More
If I had $1.00 every time I heard someone say... Read More
Think of your business as a living, breathing, organism. It... Read More
The stock market is still on a wild roller coaster... Read More
How a donation is different from a sponsorship and what... Read More
I only have to point to the 555 plus failed... Read More
Seems as though there are a lot of business closings... Read More
Why Alliances FailWhen do you know an alliance is falling... Read More
What is a Family Business? A family business is basically... Read More
The following tips have come from a wide variety of... Read More
Like most regulatory bodies in the United States, the Federal... Read More
1. Have A Strong Constitution ? Justices deliver decisions by... Read More
custom home cleaning Mundelein ..The Federal Trade Commission out of the blue decide in... Read More
Many times small businesses want to expand their businesses and... Read More
So it's time to invest some finances into advertising your... Read More
More sales and more profit. Isn't that what you want... Read More
There are many potential niches for pressure washing companies that... Read More
The following tips have come from a wide variety of... Read More
To have one of the popular in home daycare businesses.... Read More
In a quest for customers and to keep those customers,... Read More
That's right ? are you making enough mistakes in your... Read More
For really tough boat hull cleaning you will need to... Read More
When should you leverage the relationship?Leveraging sometimes brings a negative... Read More
Every company has a value proposition. That is a statement... Read More
Washing manufactured homes, mobile homes, can be a lucrative and... Read More
The Federal Trade Commission which governs the franchise industry thru... Read More
How do you know when an alliance needs to be... Read More
The Dynamics of Daylight Savings Time changes the way we... Read More
Everyone is talking about small businesses. In 1993, when it... Read More
If you are a small business and qualify to participate... Read More
In the heavy equipment cleaning business you can make good... Read More
Q: I really want to start my own business, but... Read More
The restaurant industry in the United States employs an estimated... Read More
"The way to develop self-confidence is to do the thing... Read More
As a company grows, the owner's role begins to change.... Read More
Did you know that satisfaction is the number one emotion... Read More
If you are the boss and you think your job... Read More
Small Business |