When you think "small business" do you imagine mom and pop stores with a handful of employees? Think again! Out of the 6 million US businesses with employees, over 98% are defined as a small business. This means that many companies that identify as middle market also qualify as a small business concern and are eligible for Community Business Finance's 504 Loan Program.
While the government has strict sizing rules that define a small business, you will generally qualify as a small business concern if your business has less than $15,000,000 in net worth and made less than $5,000,000 in net profit per year, averaged over the last two years.
Companies with sizeable annual revenues, $20 million or more, don't consider the 504 Loan Program when searching for financing, because they assume they are too large to qualify. Even more troubling, many middle market lenders do not offer the 504 Loan Program because they don't realize their clients are eligible. This is troubling because lenders can lose clients when a competitor offers better loan terms with a 504 loan.
Middle market lenders should know that the 504 Loan Program supports projects up to $5.5 million and borrowers can have multiple loans in some circumstances.
Lenders that offer 504 loans to their middle market customers reap the following benefits:
Satisfy Current Customers: 504 loans allow you to offer longer terms, fixed interest rates, and low down payments to your customers. Lower down payments let your customers keep more of their crucial working capital. Delivering more loan options shows customers you care about their best interests.
Attract New Customers: 504 loans are designed to finance new and expanding businesses. Purchasing a facility is often a borrower's biggest business loan, and this offers an opportunity to create an entire banking relationship.
Higher Loan Production: You can participate in larger projects because lenders only finance 50% of the total project cost. This also allows you to leverage your lending capacity across more borrowers.
Minimize Risk: Your exposure is minimized with 50% loan of total project costs and first lien position. 504 loans are collateralized with a lower probability of loss.
CRA Credits: Banks that participate in SBA 504 loans are eligible for Community Reinvestment Act (CRA) credit on certain projects.
Don't miss out on opportunities to offer your clients the best possible loan for their financing needs. Keep your current client relationships strong and build new relationships by offering the 504 Loan Program to middle market businesses. Remember, small businesses are bigger than you think
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