By John Reosti
June 13, 2016

Lenders are suddenly lining up again to make federally guaranteed loans to small businesses for real estate and equipment purchases.
The reason? Later this month the Small Business Administration plans to unveil a permanent refinance option to its so-called 504 program that lenders and agency officials say could be a game-changer.
"We see 504 refinance as a huge opportunity for lenders like us," said Alex Cohen, the chief executive of Liberty SBF in New York, which expects to originate more than $200 million of loans over the next 12 months thanks largely to the change. Its plan partly relies on financial backing from large financial institutions.
Created in 1958, the 504 program provides a fixed-rate, long-term financing option for growth-minded businesses that want to buy commercial property or lease new equipment. Except for a brief span in 2011 and 2012, the program had always been restricted to first-time property buyers.
The decision to back refinances was announced by Administrator Maria Contreras-Sweet on May 27 and is scheduled to take effect June 24. To accommodate the expected surge in 504 refinance activity, the program’s funding authority will double, to $15 billion.
By comparison, the SBA's flagship 7(a) program has $26.5 billion in funding authority.
Both programs are considered zero-subsidy, which means their credit costs are covered by fees paid by borrowers and lenders.
To fund all those new loans, Liberty has raised $75 million from private investors and increased its existing credit facility with Capital One Financial. Liberty has also hired Raymond James to help it raise an additional $100 million, according to Cohen.
In the same vein, Fountainhead Commercial Capital in Orlando, Fla., recently raised $23 million in part to take advantage of the 504 refinance option, CEO Chris Hurn said.
"We just closed a big capital raise partly because we knew this was coming," Hurn said.
"If you look at the historical 504 data, you can see volume dropped precipitously in 2013, after the refinance program expired," said Bob Coleman, author of the Coleman Report, a trade newsletter for small-business bankers. "I fully expect it to ramp back up."
Unlike the 7(a) program, where banks originate many of the loans the SBA guarantees, 504 loans are originated through nonprofit certified development corporations. For first-time borrowers, banks are vital partners, since CDCs typically finance just 40% of a credit. Banks or other lenders provide 50%, and the borrower is responsible for the remaining 10%.
Banks stand to be significant players in refinance as well. Liberty SBF, for instance, receives the lion's share of its loans via paid referrals from banks. Cohen said he wanted banks to view Liberty as "a secondary option" when they cannot extend credit to a borrower.
According to Hurn, 504 refinance may provide banks with an opportunity to "prune" their portfolios by referring clients to CDCs. "If they can do it in a strategic fashion, it's an opportunity to free up bucket space," he said.
Like 504 lenders, Ann Marie Mehlum, the SBA's associate administrator, said she is also expecting a meaningful increase in the program's lending volume as a result of the refinance option.
"We are expecting additional business," Mehlum said. "We expect there is demand. We've worked hard to get it up and running as quickly as possible."
Claire O'Rourke, the vice president for government relations at the National Association of Development Companies, has lobbied hard for 504 refinance.
"It's definitely been a top priority, if not the top priority," O'Rourke said.
Her boss, NADCO President and CEO Barbara A. Vorhyzek, called the new option 504's "holy grail."
Vorhyzek, said she "conservatively" expects the program's lending volume to jump 20% to 30% as a result of the refinance option.
In the four years since the refinance option was allowed to sunset, 504 lending activity has languished compared to the more popular 7(a) program. Indeed, while 7(a) appears all but certain to break its volume record for a second consecutive year, 504 is presently on pace to guarantee fewer loans than it did in either 2012 or 2013.
"There has been more use of 7(a) for real estate in recent years for a variety of reasons, not all agency-driven," Mehlum said.
Congress gave the SBA the power to create a 504 refinance option and to increase the program's funding authority last year, as part of the omnibus spending bill enacted in December. Since then, SBA officials have worked feverishly to translate the legislative grant into a working regulation.
"We did it pretty quickly," Mehlum said. "I'm pretty proud of my team."
The regulation Contreras-Sweet announced is actually an interim-final draft, which means SBA can still make some last-minute changes. Interested parties can also submit comment letters to the agency until July 27.
Coleman said he has noticed few if any hints of dissatisfaction with the new refinance option as it is currently written.
"I haven't heard anyone griping," he said.
Coleman added that the quickness with which Congress and the SBA moved to reinstate the refinance option surprised him. "People have been calling for this for years, and it never got done," he said.
"We're very fortunate small business is a bipartisan love affair," O'Rourke said. "This got done because everyone wanted it to get done."

 As business owners we tend to rely on our bank when we need funding. The problem with this is banks only have access to limited financing options. 

And most financing options banks do offer look at all the business financials, the personal credit and assets of the owner, and other business factors such as revenue and assets. 

These loans, such as SBA insured loans, are tough to qualify for as all aspects of the business must be perfect to be approved. 

This is where I can help you. 

Many types of financing I have available for you will not look at all the business financials, or the assets or credit of the owner, or even the revenue and business assets. 

There are many sources of financing available that only focus on certain aspects of your business, not the entire business itself. 

For example Purchase Order financing is a way you can secure money for your business quickly. With this option a factoring company is only focusing on your outstanding purchase orders, and nothing else. 

The lender is more concerned with your ability to pay than yours, and the lender will even collect on the outstanding purchase orders for you. 

Your business and personal credit and assets don't really tie into the lending approval decision; they are mainly concerned with only your purchase orders. 

Account Receivable financing focuses on your receivables, Equipment Financing focuses on what equipment you own, Revenue Financing focuses only on your business revenue. 

These are only a few of many financing options that are available to you which focus only on certain aspects of your business, not your entire business. 

This makes it easy for you to obtain financing based on the strengths of your business, while insuring lenders ignore the weaknesses. 

Another benefit of having finance options is that your monthly payments can also vary. 

If you obtain a SBA loans, your payments are set on how much you must repay each month. So if you have a slow month, it might be tough to repay that loan payment. 

But many finance options limit how much you must pay back to how much revenue you are bringing in. 

For example you can obtain $50,000 through a Merchant Advance and you will be charged a small percentage on your future credit card sales until you pay back the loan. 

If your credit card sales drop in a month, so does your loan payment. So as your sales fluctuate so does your payment. 

Business Revenue lending works the same as it is based on your business revenue. If your monthly revenue drops in a month, so does your loan payment. 

I have a multitude of financing options available for your business.  If financing is a consideration at this time, let's examine your options.