You may have noticed that the frequency of blogs and emails from me took a dip in the middle part of this year. It’s not because we got lazy — far from it. We’ve been hard at work for our small business clients (as usual) but we’ve also been working on several partnerships that will grow the secondary market for SBA 504 first mortgages. What does this mean for you and/or the small business owners you work with? Here’s the press release we launched just a few minutes ago which details some specifics of our agreement and the impact this will have on America’s small business lending (and our overall economy)…
Small Business Lending Grows with Secondary Market Expansion
Mercantile Capital Corporation Announces Partnership to Provide SBA 504 Loans in Underserved Markets
ORLANDO, FL — October 30, 2013 — Mercantile Capital Corporation today announced its partnership with CDC Capital Markets and Morgan Stanley as a correspondent agent, in an effort to grow the secondary market for SBA 504 first lien mortgages. This agreement is the company’s latest venture to make commercial real estate financing via the Small Business Administration (SBA) 504 program available to more of America’s small business owners.
“A healthy secondary market for SBA 504 first lien mortgages increases bank liquidity and allows banks to make more loans to more small business owners,” said Chris Hurn, CEO and Cofounder of Mercantile. “A disrupted small business lending marketplace is partly to blame for the sluggish recovery since the Great Recession, and this new partnership will help us jumpstart the secondary market for SBA 504 first mortgages, making it possible to fund even more small business projects.”
The secondary market for SBA 504 first mortgages has existed since the mid-1990s and reached its peak in the mid-2000s. But, according to industry experts, the market contracted as much as 90 percent during the Great Recession and remains hobbled despite recent legislation aimed at bolstering it. Both the American Recovery and Reinvestment Act (ARRA) of 2009 and the Small Business Jobs and Credit Act of 2010 enacted temporary first mortgage pooling programs. Mercantile played a large role in publicizing and utilizing these programs, but their expirations left a gap in the marketplace.
Mercantile was founded as the first private firm to specialize in SBA 504 financing and continues to be an innovative industry leader. “The 504 loan is the best option for small business owners who want to acquire, construct, or renovate their commercial real estate,” said Hurn. “If we can grow the secondary market for 504 first mortgages, then more small business owners will be able to get funding through the program. We’ll see more growth from the small business sector and create more permanent jobs in the process.”
This agreement with CDC Capital Markets and Morgan Stanley is the first of its kind for Mercantile, and the company plans to announce other partnerships soon. “We’ve been working on this for a while, and we’re hopeful this arrangement along with others soon to be in place, will be the spark that ignites a resurgence in small business lending in America, especially in underserved areas of our nation,” Hurn said.
About the SBA 504 Loan Program
The SBA 504 loan program allows small business owners to finance fixed assets (commercial real estate and equipment) with long-term, below-market, fixed interest rates. These loans are designed to finance the total project cost, including purchase price, construction/renovations, equipment, soft costs, and closing costs. A typical 504 project requires only 10 percent equity (down payment) from the small business borrower, with the remaining amount split between a first mortgage provided by a commercial lender and a second mortgage provided by a Certified Development Company (CDC). The program is self-funded and historically has been operated at a zero-subsidy status. Lender and user fees support the program and offset projected losses with no cost to US taxpayers over the 30+ year tenure of the program.
Mercantile Capital Corporation, a wholly-owned subsidiary of Old Florida National Bank, is one of the nation’s leading providers of commercial real estate financing for small business owners via the SBA 504 loan program. Since 2002, Mercantile has closed over 500 loans to fund projects worth more than $1.32 billion in 38 states, Puerto Rico, and the District of Columbia. A primary aim of the SBA 504 loan program is job creation and retention, and the company’s lending activity has helped create and retain a total of 9,001 permanent jobs since 2002. An industry leader for more than a decade, Mercantile has been on the forefront of efforts to grow the SBA 504 program by making it more widely known and available to small business owners.
We’re all very excited about what this means for small business owners across the country. What’s even more thrilling is that this is just the first of several announcements we’ll be making in the coming weeks and months. If you have questions about what this means, why we’re doing it, or how it affects your business, leave a comment below or email me at ChrisHurn@MercantileCC.com.
Thanks for reading, and please share this with someone else who’ll understand the significance of what we’re attempting here.
Dedicated to Your Continued Success,
P.S. As is my tradition, I got dressed up for Halloween at the office today. If you follow me on Instagram, Twitter, or Facebook, you’re in for a treat. Can you guess what I am? Leave a comment below!