Danny Mangum, vice president and loan officer for Mountain West Small Business Finance (MWSBF) doesn’t usually have his four year old daughter en tote when he’s getting signatures for a loan. But this was not a usual day. On this particular Saturday, Danny and his little girl made the drive 60 miles north of Salt Lake to track down a signature from a gentlemen attending his daughter’s dance competition in Clearfield. It was a busy week for everyone, so sometimes Saturdays are the solution.
But the having his preschooler along for the job may not have been the strangest part of the encounter. What some may find even more unique about the situation is that Danny spent part of the time explaining advantages of a conventional loan with the man – basically explaining the “pros” of a competing product.
“It’s my job to be honest,” Danny explained. “I want to do what’s in the best interest of the small business owner – so I talk about all the options. But I’m also confident when borrowers compare the 504 to a traditional loan, they see how great our product is, and a major piece of that has to do with the down payment.”
With a down payment requirement as little as 10% (most conventional loans options start at 25% down payment), the SBA 504 loan is a second mortgage, long-term loan made in conjunction with a first mortgage loan provided by a local commercial lender. Typically, the structure of the total project cost is:
- 50% from a Private Lender (e.g. bank)
- 30% to 40% is the SBA 504 Loan, through a Certified Development Company (e.g. MWSBF)
- 10% to 20% Down Payment from the small business
Mountain West’s loan officers will readily admit that in some cases a 504 is not the best fit for every borrower since SBA 504 Loans are a very specific type of loan.
Spencer Davis, Mountain West vice president and loan officer explained: “504s can be used by a current small business to purchase land or a building, construct a new facility, purchase equipment or renovate or remodel an existing facility.”
One veteran of the industry, Keler Soffe, Specialty Finance Officer VP for J.P. Morgan Chase & Co., explains that it’s hard to beat what SBA 504 loans have to offer. “The low down payment,” he says, “coupled with the low interest rates makes buying more affordable than ever.”