INDUSTRY INSIGHT: 
Out There?
Yes
By Bruce Beck
The capital markets freeze is impacting businesses small and large. Needless to say, financing is difficult if not impossible to find, and for those few who can get it, there will be a lot of strings attached. Interestingly enough there are cracks in the ice, especially for those business owners who are looking to buy a small office, industrial building or office condominium that will house their operations. Even with the credit markets in as much flux as they are, borrowers can obtain as much as $10 million in financing with 90 percent loan-to-value through the Small Business Administration’s (SBA) 504 loan program. A key requirement is that the building must be 51 percent owner occupied.
There is no better time to obtain financing as the SBA has observed an inverse relationship to the economy.
“The SBA 504 is an important program as it allows business owners to fix their costs, grow their business and create new jobs, which is one of the goals of the Small Business Administration,” says Melanie Smith, vice president of Bank of America. “I don’t think people know how easy it is to qualify for an SBA loan in order to buy their own building,” says Smith. “Especially in this down economy when the capital markets are tight.”
There is no better time to obtain financing as the SBA has observed an inverse relationship to the economy. When the economy heads south, banks get tighter, therefore small businesses rely on SBA loans.
One of the reasons that borrowers are able to get SBA financing in this tight credit environment is that the government guarantees repayment of at least 70 percent of the principal to the lender if a borrower defaults.
And their will be no shortage of SBA money next year as the allocation for fiscal year 2009 will be $8 billion, an increase of $500 million from the previous year.
