{"id":11345,"date":"2019-08-23T11:03:25","date_gmt":"2019-08-23T18:03:25","guid":{"rendered":"https:\/\/www.tmcfinancing.com\/?p=11345"},"modified":"2021-05-10T20:30:42","modified_gmt":"2021-05-11T03:30:42","slug":"25-yearsba-504-loan","status":"publish","type":"post","link":"https:\/\/www.tmcfinancing.com\/es\/25-yearsba-504-loan\/","title":{"rendered":"El pr\u00e9stamo 504 de la SBA a 25 a\u00f1os atrae a m\u00e1s propietarios de peque\u00f1as empresas"},"content":{"rendered":"\n

It’s not just TMC Financing that has noticed the popularity of the SBA 504 25-year term loan. It seems this is now the most popular offering of the 504 Program across the board. Since the longer term was introduced, close to three quarters of our loans have been with a 25-year term. Small business owners are eager to save even more cash month-to-month by utilizing this 25-year option.<\/p>\n\n\n\n

Read the full article from American Banker <\/a>below.<\/p>\n\n\n\n

Forgotten SBA loan Program Gets New Life<\/h2>\n\n\n\n

<\/p>\n\n\n\n

<\/p>\n\n\n\n

<\/p>\n\n\n\n

The Small Business\nAdministration’s 504 program has operated in the shadow of the larger, more\npopular 7(a) loan guarantee program throughout its 60-year-history. This year\nis proving to be an exception.<\/p>\n\n\n\n

SBA\nofficials, as well as lenders at the certified development companies that\nparticipate in every 504 loan, ascribe much of the program\u2019s recent growth to a\n25-year lending product introduced in April 2018. Prior to that, 20 years was\nthe longest term for a 504 loan.<\/p>\n\n\n\n

At the\nsame time, the 7(a) program \u2014 which is tied is caught in the middle of a budget battle<\/a> between Congress and the\nTrump administration \u2014 has languished.<\/p>\n\n\n\n

In a little\nmore than nine months ending July 12, 504 lending totaled $3.8 billion, up 7%\nfrom the same period in the agency\u2019s 2018 fiscal year. Lending under 7(a)\ntotaled $17.8 billion, an 8% year-over-year decrease. The federal government\u2019s\nfiscal year begins Oct. 1.<\/p>\n\n\n\n

\"SBA<\/figure>\n\n\n\n

The\nability to extend payments over an additional 60 months \u2014 especially at today\u2019s\ncurrent low interest rates \u2014 has proven to be hugely popular, according to\nDianna Seaborn, director of SBA\u2019s Office of Financial Assistance.<\/p>\n\n\n\n

The new\nproduct \u201cactually has performed better than we expected,\u201d Seaborn said.\n\u201cBecause we\u2019ve had such a flat yield curve, there\u2019s really no difference in\nrates\u201d between the 20- and 25-year terms.\u201d<\/p>\n\n\n\n

Currently,\n\u201cthe [rates for] the 25-year term [504 loan] is in the low fours, less than prime,\u201d\nsaid William Manger, assistant administrator for capital access. In contrast,\n7(a) loans are tied to the prime rate, which is currently around 5.5%.<\/p>\n\n\n\n

Cash flow\nis a critical factor for entrepreneurs, so low rates and longer repayment terms\nassociated with the 25-year loan can shift money that would otherwise be\nconsumed by debt service back into their pockets.<\/p>\n\n\n\n

\u201cIt\u2019s\nhuge,\u201d said Pat MacKrell, president and CEO of The 504 Company in Albany, N.Y.\nMacKrell added that, given the current interest rate environment plus the fact\nprepayment penalties for the 25- and 20-year loan are identical, he is not sure\nwhy any borrower would opt for the shorter note.<\/p>\n\n\n\n

Those\ndoubts notwithstanding, the 504\u2019s 20-year loan still has a constituency. Yet\nthere is no disguising the rapid shift to the 25-year product. In the 15 months\nsince SBA rolled it out, lenders have closed 4,349 25-year loans for just over\n$4 billion, Manger said. Over the same span, they\u2019ve closed 3,309 20-year loans\nfor about $2.25 billion.<\/p>\n\n\n\n

At\nOakland, Calif.-based TMC Financing, one of the most active CDC\u2019s on the West\nCoast, 73% of 327 loans closed since April 2018 have been 25-year deals, CEO\nBarbara Morrison said.<\/p>\n\n\n\n

\u201cIf I\nlooked at just the last six months, I suspect the proportion might be even\nhigher,\u201d Morrison added. \u201cBusinesses are loath to spend cash on fixed assets.\nThey want to use their money to grow.\u201d<\/p>\n\n\n\n

Unlike\n7(a), where SBA guarantees loans up to $5 million for a variety of uses,\nincluding working capital or purchase of real estate and equipment, 504 loans\ncan only be used to finance capital equipment or commercial real estate.<\/p>\n\n\n\n

And where\n7(a) loans are relatively straightforward transactions with loans made directly\nby a bank or other lender and guaranteed by SBA, 504 deals are more complex.\nBorrowers provide a down payment of at least 10%, a CDC kicks in 40% and a\nthird-party lender, typically a bank, provides the remaining 50% and has a\nfirst lien on financed assets.<\/p>\n\n\n\n

There\u2019s\nalso a job-creation requirement tied to 504 lending. Current rules call for\ncreation of one job for every $75,000 provided by SBA.<\/p>\n\n\n\n

Investors\nfinance the CDC portion of the loan through debentures sold periodically by\nSBA. With 504, the agency guarantees payment on the debentures, rather than the\nunderlying loans.<\/p>\n\n\n\n

Now, with\nthe 25-year loan well established, SBA, along with a bipartisan group of\nlawmakers, is seeking to tap the revitalized 504 program and the 25-year loan\noption to spur manufacturing.<\/p>\n\n\n\n

The\nmaximum loan size for manufacturing-related loans is currently $5.5 million,\nbut the Trump administration is seeking to increase it by $1 million as part of\nits proposed fiscal 2020 budget.<\/p>\n\n\n\n

\u201cWe think\nhaving a 25-year term is obviously better for someone taking on debt of $6.5\nmillion,\u201d Manger said. SBA also recently relaxed the job-creation requirement\nfor manufacturing projects to $120,000 per job, Manger added.<\/p>\n\n\n\n

A\nbipartisan group of lawmakers upped the ante Tuesday, introducing legislation\nin the House and Senate that would increase the maximum size for 504\nmanufacturing loans to $10 million.<\/p>\n\n\n\n

According\nto Seaborn, SBA officials had been considering a 25-year 504 option for several\nyears before former Administrator Linda McMahon gave it the go-ahead.<\/p>\n\n\n\n

Said\nManger: One of the first things [McMahon] signed was authorization for the 25-year\ndebenture, allowing for a 25-year term for the 504 program.<\/p>\n\n\n\n

\u201cWe have\ndiscussed it off and on for a period of years,\u201d Seaborn added. \u201cIt was being\nnurtured in some ways, but it wasn\u2019t put as a priority until the current\nadministration came.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"

It’s not just TMC Financing that has noticed the popularity of the SBA 504 25-year term loan. It seems this is now the most popular offering of the 504 Program…<\/p>","protected":false},"author":12,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"content-type":"","inline_featured_image":false,"footnotes":""},"categories":[25],"tags":[467,337,369,466],"class_list":["post-11345","post","type-post","status-publish","format-standard","hentry","category-news-updates","tag-25-year-term","tag-sba-504","tag-small-business","tag-small-business-lending"],"acf":{"related_posts":null},"yoast_head":"\n[:en]25-Year SBA 504 Loan Attracts Small Business Owners | TMC Financing [:]<\/title>\n<meta name=\"description\" content=\"Small business owners are eager to save even more cash month-to-month and are utilizing the 25-year SBA 504 loan to do just that.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" 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