504 Loan Business Thriving
At least that seems to be the case when it comes to the small business 504 loans heading out of Holland’s Lakeshore 504 office.
Lisa Luckey, director of business development for Lakeshore 504, said that the number of small business loans she has seen have only been increasing this year, with no slowdown in sight.
In fact, this has been a record year for Lakeshore 504 in that the number of loans it granted has tripled last year’s pace.
Luckey said prospects for the coming year look just as good, if not better, thanks to last week’s adoption of Senate Bill 1375, The Small Business Administration 50th Anniversary Reauthorization Act of 2003. The measure increases 504 program loan limits from the current $1.3 million to $2 million.
She said she also is anticipating passage of a second measure, which would do away with the geographic limits for 504 lending.
Currently, Lakeshore 504 is empowered to lend only within its nine-county region. The proposed action would permit Luckey’s office to lend anywhere in the state. The measure would grant the same scope to every other 504 office in Michigan.
The Anniversary Act, in effect, authorizes the Small Business Administration to increase its maximum 504 loan guarantee from $1 million to $1.5 million for general loans.
It also raises to $2 million the limits for loans that achieve certain public policy goals: rural development, expansion of exports, minority business development, and expansion of small businesses owned and controlled by veterans or women.
For 504 loans to manufacturers, the new law increases the maximum guaranteed loan to $4 million. The measure also streamlines the 504 loan application process.
“They are doubling the size of a loan we can do, and we are only 40 percent of the loan, so that means we can do a $6 million project, which is really exciting,” Luckey said.
“How it works is that a bank or other financial institution provides 50 percent of the financing and then Lakeshore 504 provides anywhere between 30 and 40 percent, and then that allows the borrower to only come up with 10 percent down, in most instances.”
It is because of this attractive equation — mixed with highly favorable interest rates — that Luckey said her organization is seeing triple the number of businesses seeking and securing SBA financing.
Because of the hike in loan limits and continued low interest rates, Luckey said the organization is also stepping up marketing and sales efforts. She said this is due, in part, to the encouragement of Chris Byrnes, immediate past president of the Holland Area Chamber of Commerce.
“He wanted to grow this program because it spurs economic development, creates jobs and provides financing for start-up businesses,” Luckey said.
“This program follows the market and our interest rates are at an all-time low.”
The advantage of the program, she said, is that it offers its attractive interest rate on a fixed, 20-year basis. “It doesn’t fluctuate. It is fixed for 20 years.”
But while the number of businesses 504 loans has jumped in the last year and the region in which the program can award loans soon will expand greatly, Luckey said those changes don’t herald substantive changes in Lakeshore 504 itself.
Luckey promised that while the doors of Lakeshore 504 will be open to businesses throughout the state, its focus will continue to be West Michigan and the lending it knows best.
One thing that may change in the coming year, Luckey said, is the size of the office. The pace of lending simply requires some added space and people.
Luckey also said Lakeshore 504 may diversify its lending.
“We are looking at doing a micro loan program within Lakeshore 504, and we are also looking into the future at the USDA loan programs.
“We also partner closely with MEDC (Michigan Economic Development Corp.) in working with brownfields, job-training grants, and we provide the whole business development package.
“We look at a lot of growth in the coming years.”