The SBA Commercial Loan Program You Must Know About

Knowledge is half the battle to getting funding in commercial finance these days. Half the battle is finding the loan programs that are not just in existence, but actually providing funding for commercial projects. The SBA has a program known as the 504 that is a real winner if you can qualify.The capital markets have gone through wild fluctuations this past 15 years. We've gone from quick and easy money that just about anyone could get for a project to the near failure of the markets to a state of cheap, but tight, money. As money has become tight, many have argued the commercial finance markets are dead. They are wrong, grossly so. This is because the agency lenders like the SBA have been trucking along without change through the entire period.The CDC/SBA 504 loan program is a combination financing package. It is designed to assist small businesses with large asset purchases such as real estate. The funding comes with a catch, however. It is tied into community redevelopment areas, which is where the Community Development Company ("CDC") comes in. The SBA does not provide direct loans or guarantees to the borrower, but does so through the CDC in the area that originates the financing.The 504 program creates a four party relationship. The first party is, obviously, you. As the borrower, you must put down 10 percent on the deal. The second party is a private bank that must put up a first for the initial 50 percent borrowed. The CDC then comes in and funds a further 40 percent with the SBA guaranteeing it. This may sound convoluted, but it is actually a tremendous opportunity. It provides you with 90 percent loan-to-value financing and makes the first loan from the commercial bank fairly easy to get since they sit in a first position and have loaned a much smaller percentage then they would in a traditional deal.The CDC/SBA 504 loan program is a real winner. That being said, it is also a complex deal with four parties involved. Make sure you retain an experienced commercial broker before seeking out this financing.