NADCO Press Release
SBA 504 LOAN PROGRAM –
THE ONLY BANKING/LENDING SUCCESS DURING U.S. CREDIT CRISIS
National Association of Development Companies (NADCO) reports SBA 504 loans encouraging business expansion remain available for America’s small business entrepreneurs
McLEAN, Va, (November 25, 2008) – One needs to look long and hard for even the smallest success in today’s dramatic economic downturn. While virtually every analyst and pundit is wallowing in an economic forecast of doom and gloom, it may come as a big surprise, but the SBA 504 loan program is still helping small businesses nationwide to expand (see NADCO’s 2008 Economic Impact Study). No $700 billion bailout, no Wall Street fallout, just Main Street small businesses that are turning SBA 504 loans into increased profits while adding employees and bolstering their local economy’s tax base.
When the economy is strong and access to capital is relatively easy, there is typically less demand for SBA financing. In the case of the SBA 504 loan, a private sector lender partners with a Certified Development Company (CDC) to provide financing for the purchase, construction or renovation of owner-occupied commercial real estate. Use of the SBA 504 loan tends to become increasingly important as a source of long term financing when traditional sources of money decline as they have in recent months.
In spite of the credit crisis that has crippled many financial institutions and slowed lending for commercial expansion, CDC’s are supporting entrepreneurs in virtually every US market with SBA 504 loans for qualified small businesses. “The credit crisis has not frozen the SBA 504 loan program. Loans are still available for businesses seeking to grow through real estate acquisition, expansion of existing facilities, or purchase of new equipment,” according to NADCO President Christopher Crawford. “CDCs, our banking partners and the SBA are doing business as usual and will continue to do so for the long haul.”
SBA 504 loans provide a steady source of new long-term capital at a fixed rate, and frequently with only 10% down on a new project for a small business.These loans are the perfect tool for conserving cash for operating expenses.A vacant commercial property in a neighborhood can represent an opportunity for a small business owner who needs more space.Now may be the perfect time to consider expanding into a larger facility, or simply seizing the chance to buy a first building at an advantageous price.
No Risk Loans, SBA Guarantees and No Federal Expenditures
The CDC industry reports that virtually all lending partners using the 504 program are still actively lending on SBA projects to qualified expanding small business borrowers. The SBA 504 loan program remains the ideal program for banks, as it mitigates private sector lender risk on commercial real estate financing through the use of an SBA guarantee.
Funds for the SBA 504 loan program come from the sale of long term bonds each month. These bonds carry the full faith and backing of the U.S. government and present an attractive investment option for money managers, pension funds, insurance companies and other large institutional investors. The sales of SBA 504 bonds, known as debentures, have been successfully conducted every month for the past 27 years. Crawford concludes, “The amazing part about 504 is that it costs the federal government absolutely nothing, due to the low default rate costs that are covered by its low fees. Likewise, there is no requirement for a Congressional appropriation of funds for 504.”
CDCs are located in every state, as well as in Puerto Rico. A local CDC may be found through www.nadco.org, or by contacting any local commercial bank that participates in SBA lending.
About the National Association of Development Companies
Created in 1981, the National Association of Development Companies is the trade association for America’s Certified Development Companies (CDCs). Certified by the U. S. Small Business Administration, CDCs are community-based economic development organizations that serve their local communities and states, and are dedicated to the promotion of small business expansion and job creation through SBA’s 504 Loan Program. In addition to the 504 program, many CDCs also provide small businesses with access to other Federal, state, and local economic development loan programs.
Based in the suburbs of Washington, D.C., NADCO provides legislative and regulatory support for the 504 Loan Program on behalf of CDCs, the program’s lending partners (including first mortgage lenders, attorneys and others allied to the industry), and 504 small business borrowers. For more information, please call (703) 748-2575 or visit http://www.nadco.org.