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A Little Rebranding

12/18/2013

First of all, I would like to wish everyone a Merry Christmas and Happy New Year. This will probably be the last blog I post until 2014, so I hope all of you have a wonderful holiday season.

Before I shut down for the holidays, I want to announce that beginning in 2014, the 504 program will change its rather non-descript, scarily bureaucratic, vaguely governmental name (could be a loan program, could be a nefarious mind-control initiative, who knows). Let’s ring in the New Year welcoming the Real Estate Advantage Loan program. It will provide the same type of financing and offer all of the same advantages as the 504, just with a shiny, pretty new name.

Let’s all give a hale and hardy welcome to the Real Estate Advantage Loan program (bask in the applause, look humble and… exit).

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All the Savvy Bankers

12/11/2013

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All the single ladies, all the single ladies
All the single ladies, all the single ladies
All the single ladies, all the single ladies
All the single ladies, Now put your hands up

Up in the club, we just broke up, I'm doing my own little thing
Decided to dip and now you wanna trip
'Cause another brother noticed me*

Beyonce is awesome and unbelievably talented, but what most people don’t know is that before she was a pop star, she was interested in commercial lending. Most people also don’t know that the above lyrics were not the original words to the hit smash “All the Single Ladies.” It was originally written as an ode to the SBA’s 504 lending program and went a little something like this…

All the savvy bankers, all the savvy bankers
All the savvy bankers, all the savvy bankers
All the savvy bankers, all the savvy bankers
All the savvy bankers, Now put your hands up

You’re up in your office, we just hung up, I'm doing my own little thing
Decided to borrow and now you feel sorrow
'Cause another banker noticed me

The song’s lyrics were changed because the record company did not think it would be a smash hit. Can you believe they called it a “niche song?” Well, Mr. Record Company Executive, I would have bought a copy.

So what did Beyonce know that you might not know? Well, here are some of the benefits for banks using the 504 program (They are numerous, but I will only hit the highlights).

Mitigation of credit risk- Lenders have first-lien position and typically a 50% loan-to-value ratio, minimizing collateral risk.
Manage overall lending limits and industry exposure- Smaller banks can entertain larger projects and larger banks can limit their exposure to certain industries.
Assist more customers- Leverage lending capacity across more borrowers and diversifie default risks.
Gain new customers- 504 loans are designed to finance growth companies and are often the basis for entire banking relationships.
Active secondary markets- There is an active market for 504 first mortgage loans.
Strengthening core earnings- 90% financing means that more of the customer’s funds remain on deposit.
CRA Credit- Banks using the 504 are eligible for Community Reinvestment Act (CRA) credit.

As you can see, there are a number of selling points to the 504. It is not hard to understand why Beyonce would be so excited about the program.

* Single Ladies" was released on 9/10/2008. It is track #1 on the album I Am... Sasha Fierce. Written by Christopher Stewart;Jr. Harrell;Terius Nash;Beyonce Giselle Knowles: Performed by Beyonce Giselle Knowles; Also, please know that I made up all the stuff about Beyonce being interested in commercial lending. I just made it up to get your attention because though the SBA 504 loan is a wonderful option for lenders to use, it is not exactly the most interesting topic for a column. So I took a little creative license… ok a lot of creative license… ok I lied…

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Mythbusting

12/4/2013

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Bureacracy. Maybe the term should be capitalized in bold, big block, shouty letters…

“BUREAUCRACY.”

Whenever anyone considers dealing with the federal government their thinking automatically leaps toward a complicated process riddled with inefficiencies and frustrations. “And”, he said with a wink and a fading, sympathetic smile, “I am not going to tell you differently because in most cases you are absolutely correct.”

However, working with Enterprise Development for a 504 fixed-rate commercial loan actually breaks the stereotype. Not just breaks the stereotype, but body slams it, hits it with a folding chair, pulls out brass knuckles from under the ring and… Whoa, wait a minute… Sorry, I think these previous sentences give clues to my misspent youth which was consumed in front of a TV drinking Mountain Dew, eating Cheetos and watching professional “Rasslin’.” Me, Grandma (mawmaw as I called her) and Rufus R. Jones versus Harley Race; good times… Oh right… the loan…moving forward.

I have discussed the full 504 process from beginning to end in past articles, but not the actual nuts and bolts of applying. The bank will obviously have a large number of forms for the applicant to complete. The awesome thing about the 504 program is that most of the forms used by the bank can also be used by Enterprise Development. We require only 3 extra forms. AND, they are very short, I might add. To help put this in perspective, here are five things that require more forms to be completed than a 504 loan. Drum roll…..

5. Getting a tattoo often requires more forms than the 504 loan. The next time you choose to have an intricate design shot under your skin with a screaming needle and ink, think “I could have got a 504 loan.”

4. Flying around the forest canopy on a zipline wearing an unflattering hat and wardrobe wrinkling harnesses often requires more forms than a 504 loan.

3. Bungee jumping requires more forms than the Enterprise 504 loan. So the next time you willingly choose to be a human piñata, please think “I could have gotten a 504 loan.”

2. Eating hot wings at some restaurants require more forms than the Enterprise 504 loan. I will share a story with you, offline of course, about the dangers of hot wings and the necessity of signing release forms before consumption. This was not good pain.

And finally…

1. Voluntarily jumping out of a perfectly good airplane requires more forms than applying for a 504 loan.

The 504 process, from the borrower's perspective, really is that simple.

Three forms, fixed interest rates for up to twenty years and very few bureaucratic strings attached…? It really is one heck of a good deal.

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A Little Rebranding

All the Savvy Bankers

Mythbusting

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