TMC Financing Then and Now: How Two of San Francisco’s Most Iconic Coffee Roasters Made Use of the SBA 504 Loan Program

TMC Financing clients Caffe Roma Coffee Roasters and Ritual Coffee Roasters have more in common than their love of the bean: they both utilized the SBA 504 program to meet their expansion and revitalization needs.

In 1995, Barbara Morrison, founder of TMC Financing, knew that a tide was coming to San Francisco. Property values were rising, corporations were expanding, and small businesses were starting to feel the squeeze of being in one of the most livable cities in the U.S. With her extensive background in small business finance, Morrison took her mission of preserving local communities to the San Francisco streets, impacting Bay Area business landscapes.

TMC Financing helped their clients take advantage of a lending program offered by the Small Business Administration (SBA) called the SBA 504 Loan Program.  The 504 loan is specifically designed to help small-business owners finance commercial real estate and other fixed assets, with long-term, below-market, fixed interest rates.  

Over the years, TMC Financing has become a Bay Area resource by giving small and local businesses a fighting chance at expansion, success, and permanence in their neighborhoods of origin through the buying of their buildings.

One such company that became an early beneficiary of the SBA 504 loan program was the Caffe Roma, which connected with Morrison and TMC Financing in the early 1990s.

Caffe Roma Coffee Roasters

Caffe Roma was founded in 1977 in North Beach, San Francisco by Sergio Azzollini, who brought with him from Italy a profound love for coffee and coffee roasting. He saw an opportunity to offer a refined, carefully crafted coffee experience to his customers, which led to business success and, ultimately, the need to expand.

In 1995, Azzollini received financing through the SBA 504 Loan Program, and was able to expand his roasting facility to the South of Market (SOMA) area of San Francisco with a low down payment and a below market, 20-year term. From there, he was able to add staff, improve his output, and eventually add wholesale coffee sales to his list of services. Caffe Roma continues to provide a unique, multi-step coffee experience to the residents and business of San Francisco, now as a multi-generationally run family business.

Ritual Coffee Roasters

Eileen Hassi Rinaldi opened Ritual Coffee Roasters on Valencia street in 2005, and became an overnight sensation with her unique and delicate roasts, as well as with her methods for extraction. Before long, Rinaldi was expanding, adding five more locations within just 14 years, and serving several more customers through her wholesale connections.

Recently, Rinaldi realized she was in need of additional space for roasting, administration, and storage, so she reached out to TMC for financing for a new location. By utilizing the SBA 504 Program, Rinaldi was able to purchase a 7,400 SF industrial building in the Mission District for $3.8 million. The property is larger than what they need at this time so they will be leasing back 35% of the building to the seller, an opportunity to increase monthly cash flow. With their second purchase in The Mission, Ritual is planting deep roots in the community it calls home.

How the SBA 504 Loan Program Helps Small Businesses

The SBA 504 loan program provides small business financing partially guaranteed by the government (the Small Business Administration). The SBA does not directly issue the loan, instead the funding comes from an extended network of SBA approved financial institutions. Under CDC/504 loans, the SBA offers money for businesses to purchase real estate, new machinery and equipment, or make improvements like landscaping. Additionally, if you need to renovate your existing office or facility, you may be eligible for 504 financing.

Finally, the structure of SBA 504 loans allow business owners to retain more of their liquidity while only having to provide the asset they are buying as collateral. For most SBA 504 loans, only 10% down is required, with the loan often fully amortized over 25 years.

Why the SBA 504 Loan Program Worked for Caffe Roma and Ritual

Long-term, Fixed, Interest Rates

The SBA 504 program allows borrowers to finance the purchase of their commercial property with below-market, long-term fixed interest rates.  Ultimately, 504 borrowers can hedge against rising interest rates and stabilize their occupancy costs for the entire life of the loan. Business owners who know their occupancy costs can more easily budget and focus on future financial growth.

No Additional Collateral Needed

The only collateral a borrower needs is the asset they are purchasing.

No Balloon Payments

When a commercial real estate loan entails a balloon payment this means the borrower will have to pay a large sum at the end of the loan’s term OR refinance the loan. NOT with the 504 loan –borrowers avoid this requirement altogether.

Equipment Financing

In addition to the acquisition of commercial property, the SBA 504 loan program also allows business owners to finance equipment and other fixed assets, such as fixtures, furnishings and machinery with a service life of at least 10 years.

How They Qualified

One of the best aspects of the 504 program is nearly all for-profit businesses are eligible. However, the business must occupy at least 51 percent of the building. If the financing is for the construction of a new building, the business must occupy 60 percent of the building.

How to Get Your Customized Loan Package From 504 Experts

The SBA 504 loan is administered through nonprofit mission based lenders, also known as CDCs, such as TMC Financing. A CDC’s mission is to help match you with the loan product that will best support your growth, gain long-term success and create a positive impact on your community. Ultimately, CDCs guide business owners through the entire loan process and act as the owner’s advocate throughout the life of the loan. CDCs can provide a prequalification analysis to small business owners, so they know their purchasing power and can act fast when they find the right opportunity. A prequalification letter can give you a leg up over other offers. In the competitive Bay Area market, this can make or break a deal. TMC can complete a letter within 48 hours

About TMC Financing

TMC Financing is one of the nation’s top-ranking CDCs and a Premier Certified Lender with the SBA. If you are thinking about buying your own commercial property, talk to one of our local 504 loan experts. Regardless of where you are in the process—whether you have a building picked out or are just hearing about the 504 option for the first time—TMC Financing can help guide you through the next steps, from the prequalification process through the duration of your loan.