It’s no secret that the SBA has a less-than-stellar reputation in the minds of most business owners and even some lenders. The general assumption is that the SBA is stodgy, slow and not worth the hassle. But I think it’s time that we stop vilifying the SBA.
In speeches and interviews lately, I’ve been pointing out that the SBA has gone from a “lender of last resort” to a “lender of choice” — in a matter of only two years. Watch this brief video I recorded to hear me explain why I believe this, and why business owners should consider buying commercial property with an SBA 504 loan in the near future.
I truly think that you dismiss SBA lending at your own peril these days. Its indispensible programs and efforts to become more efficient have eclipsed its negative reputation of the past. So what do you think? Agree or disagree? Let me know by leaving a comment below or emailing me at ChrisHurn@MercantileCC.com.
Dedicated to Your Continued Success,
Chris
P.S. If you know someone who ought to own their commercial property, or who is looking to expand their operations, contact me right away and introduce me to them. Call me at 1-866-622-4-504 or email me at ChrisHurn@Mercantilecc.com today!
P.P.S. Don’t forget that it’s now possible to refinance commercial mortgages with SBA 504 loans. If you know of someone who bought their commercial real estate with a conventional loan, introduce us to them because we may be able to help them fix their interest rate and lower their payments. If you want to read-up on SBA 504 refis in the meantime, go to www.SBA504LoanRefi.com.
P.P.P.S. We’re on the Twitter, the Facebook and the YouTube, so make the most of those resources and keep up-to-date on smarter small business financing.
Tags: Business_Finance, Chris Hurn, Commercial property loans, commercial real estate financing, commercial real estate loan, Mercantile Capital Corporation, SBA 504 Expert, SBA 504 Loan, SBA financing, SBA loans, SBA Refinance, Small Business Administration
Jerry says:
I hope that your experience with the SBA is a sign that they are moving toward a more cooperative and market sensitive organization. I beleive that their reputation was earned over many years and my hope is that your experience is a sign of better things to come from the SBA…especially for the smaller businesses in our community
Mohan Condoor Rao says:
I for one totally agree with your position. I strongly feel the SBA is the Lender of Choice.
Lawrence Jackson says:
I think you are on point. Thank you for all you do to keep us informed. I would like to meet you and pick your brain on some 504 topics. I run a small 504 program that is poised for growth once we build our capacity. Thank you again.
Kurt Howell says:
I have done several dozen SBA-compliant Phase I ESA’s over the last several years and they have been very easy to work with. The key is knowing exactly what they request, communicating that to the client up-front and doing things like using electronic reports to save time. I would say if the deal makes sense to a lender and borrower it can be a fairly smooth process.
Darren says:
Good to hear. hopefully it is true. I sat with SBA last year and provided all the information and was told by 3 banks that are SBA
friendly that I am qualified…….. Still waiting…………………..
Chris Hurn says:
I’m sorry to hear of this. As I said in the video, it’s more than likely the lenders you’ve dealt, as opposed to anyone at the SBA who’s drug their feet. Without more information, that’s all I can surmise. Feel free to email outside of this blog.
Yousry Juakiem says:
I agree 100%.
Andrew Brown says:
Chris, Thanks for sending me the information.
I believe you are correct. The SBA is only a clearing house for the loans and for a borrower to get approved it really does matter if the organization you are working with has some knowledge about the correct process to get a borrower approved for a loan.
I appreciate your bravery and clarity on this issue. I am a veteran and I am clear SBA about the resources they provide to Veteran Owned-Businesses.
Dan Spletter says:
Chris, we should try to keep it in the reality area when it comes to SBA loans for real estate. Yes, they are important to business owners who wish to purchase their own building, usually because of the long term equity growth that benefits the business owner when he decides to “cash out.” Only in rare situations does owning the building really benefit the business, which is usually better off saving the cash down payment for either expansion or for a bad turn. Renting is nearly always the better cash flow play for the business. And the job increase component is often a myth that seems to exist mainly to justify the program’s existence. Frankly, I’ve been waiting for years for someone to spill the beans on the SBA, especially when the borrower fees don’t cover the costs. In the meantime I’ll stay with the others that make a living off the program’s existence.
Chris Hurn says:
Dan –
I don’t believe it’s only in “rare situations” that owning versus leasing benefits a small business. I’ve seen many cases where consolidating multiple )rented) sites into one has helped; monthly facility payments have been lowered; and so forth. But, we’re primarily concerned with helping the OWNERS of these businesses and for them, it almost always benefits them to own instead of just throwing-away their facility expense each month without getting much (other than somewhere to operate out of) in return. We’re concerned with wealth creation for business owners, which is easily done by converting a rental expense each month into a commercial mortgage payment (it’s another way to create way, in addition to owning a small business in the first place).
To your other point (regarding job creation): unlike other SBA loan programs, the 504 requires the business owners to not only list, but certify, that they intent to hire X number of people by utilizing government-guaranteed funds. Yes, it’s been “watered-down” some recently (i.e. various public policy goals and job RETENTION have trumped job CREATION), but it is very much questioned and verified. I see relatively few other areas anywhere in governement where this much is done (like in the 504 loan program) to assure that the funds are used for economic development. In most other areas of government, wild (and often wrong) projections are made based on eroneous assumptions.
On your third point (about borrower fees): you are again misinformed. Not only does the SBA 504 loan program operate at a zero-subsidy, it has done so for almost 9 years… and a few years ago (the last two of the Bush Administration) a surplus was actually created that was quickly “shifted” elsewhere in the federal government vast blackhole. Fees were raised this past fiscal year almost 90% over the previous year in order to do the exact opposite of what you claim, namely to cover the costs of the program. Despite that fee increase, the program remains extremely competitive to conventional bank financing and is a tremendous program that more small business owners NEED to know about.
I’m not sure what your last sentence means “in the meantime I’ll stay with the others that make a living off the program’s exisitence.” Perhaps you can explain this?
Chris
Charles Holiday says:
I agree. However, SBA must become more USER FRIENDLY to change the protracted image of old.
Chris Hurn says:
I agree, Charles, but having worked with them for nearly 15 years, they are light years ahead of how they once were. Always room for improvements, yes.
Jeff Thompson says:
I appreciate your wisdom and your emails.
Joanne Jolin says:
Chris,
Well said and clearly communicated. Bank’s lend the money with a government guaranty. Too many times the SBA is used as a reason for decline. Statistics show 95% of businesses are eligible for SBA financing. What business owners need to realize is their business must qualify for financing based on risk; credit, cash flow, collateral, capacity and good character.
Preferred Lender or GP Lender is a minor difference these days. It’s about the experience of the lender and support staff at the lending institution.
Keep up the great work educating the public and business community!
Chris Hurn says:
Thanks Joanne!
JOAN PERKINS says:
CHRIS,
THE S.B.A. LOANS ARE A RIP-OFF.///
I GAVE THEM $429.00 TO HELP ME WITH
GETTING A SMALL BUSINESS LOAN AND
KEPT GETTING STALLED OFF THEN JUST
PLAN IGNORED./// SO WHO ARE YOU ===
KIDDING.????????
Chris Hurn says:
Not “kidding” anyone, Joan. To the best of my knowledge from 15 years of small business lending experience, the SBA doesn’t take a $429 upfront fee to consider making a loan. I think you got “taken” by someone else. No sense blaming the SBA for something I imagine a broker or banker may have done. BUT, thanks for making my point that SO many find it SO easy to blame the SBA for things that aren’t even their fault.
Jeff Hawkins says:
Hi Chris,
The 504 loan is great, but for people like me who need less than $100,00 to start a business it does no good. Honestly the SBA says it cares about the little guy, but there is little proof of this, and there is little proof of this with Mercantile Loan. You only want the big fish. I know , I came to you for help when a historic building went up for sale for a bargain price of $50,000, this was a 2 story building in the middle of downtown, with a population of 20,000 people, with surrounding area of 100,000 people, I was told that this was too small of a loan for you guys to mess with. Well it would have made a world of difference to me. Something like this comes along once in a lifetime and I missed out because I trusted you instead of another lender. Please inform your readers and listeners of ways for the true little guy to get his foot in the door, if it’s worth your time.
Chris Hurn says:
Jeff — my responses to your comments follow:
1. Correct, the 504 loan isn’t really “built” for $100,000 total projects. Sorry, but it just isn’t.
2. Proof: the SBA finances tens of thousands of America’s small business owners yearly. We, at Mercantile, have helped nearly 400 for over $600 million in total projects in the past 8 years. You may be angry (because your deal didn’t get done), but you have no justification for spreading misinformation, half-truths, or slandering people. BUT, you’re doing a GREAT job of proving my points in the video. So thanks for this opportunity.
3. We probably only finance around 10 percent of the people that are attracted to what we do. So while doing your loan might have made a “world of difference” to you, it wasn’t a fit for us. If we loaned money to EVERYONE who ever asked us, we would have been a casualty of the past few years’ Great Recession (if not sooner).
4. If my people immediately said your deal was “too small,” then I’m not sure how we did-you-wrong? Would you have preferred we tell you what we thought you’d want to hear (often done by many SBA lenders, further contributing to the SBA’s troubled reputation)? That would have been tantamount to lying. We said it didn’t work and then you say you “trusted us” instead of another lender? Something doesn’t fit here. Did you not LISTEN to the feedback we gave you? I don’t see how that’s somehow our fault.
5. Responding to your diatribe probably hasn’t been worth my time, but since you asked (and you’ve proven my points again, earlier), here goes: you probably should have gone to your local community bank in your small town for conventional financing or tried to do an SBA micro-loan (you also could have paid cash, found investor partners, or put the amount on your credit card). ALL of these possibilities have various pros and cons, but when we quickly said “no,” that’s what it meant from us. We’re not structured to do transactions of only that size or smaller — we try to make a profit for our shareholders — and in doing deals that small, we cannot. Sorry.
Please listen next time, for both our sakes.
Rick Falls says:
Chris,
I just got your letter in the mail yesterday about the SBA 504 Refi Program – it’s interesting and I think I might have a prospect for you.
I also wanted to commend you on doing what you’re doing – you’re really sticking your neck out there and being vocal about what’s got to happen, and man, you’re doing a great job! Good for you, man, I’m proud of you – more of us need to get out there and talk about what we do in a way that it’s effective, and I think you’re really taking a good shot at that.