Independent Banker - May 2020 - 20

PORTFOLIO
Grant Pauly, owner of 3 Sheeps
Brewing Co., is an SBA 504 loan
customer of Mark C. Maurer at
Investors Community Bank.
Make the most of 504 loans
Lending
While not the most popular SBA loan
program, 504 loans may off er an attractive
financing option for both new and seasoned small
business customers. They're another tool in community
banks' toolbox for fostering small businesses' success,
at a time when they need support more than ever. By
Beth Mattson-Teig
T
he Small Business Administration's 504 Loan Program
is often overshadowed by its 7(a) counterpart.
Certainly, it's a fraction of the size of that program, generating
about $5 billion in commitments in fi scal 2019,
compared with $23.2 billion in fi nancing for 7(a) loans. Yet,
504 loans can be an important part of the toolbox of products
that community banks off er business customers.
Banks use 504 loans specifi cally to fi nance fi xed assets.
20 Q ICBA Independent Banker Q May 2020
One big selling point for borrowers is the ability to secure
a long-term, fi xed-rate loan with terms of 20 or 25 years
for acquisition, construction or improvements to existing
facilities, as well as 10-year loans on business equipment.
Additionally, borrowers can put down as little as 10% versus
the usual 20-25% requirement of a conventional loan.
In 2019, $1.1 billion-asset Oak Valley Community Bank
in Oakdale, Calif., funded about $26 million in 504 loans.
The bank sees them as an attractive option for good customers
who may not have the equity for an expansion or a
new property but can manage the 10% down payment. " So,
it provides them an opportunity to grow and provides us the
commitment and relationship that we retain with the customer, "
says Mike Rodrigues, executive vice president and
chief credit offi cer.
Many bankers view the 504 loans as another avenue to

Independent Banker - May 2020

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