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Sunday, 13 September 2015 20:24

Grand Rapids-based SBA loan coordinator seeks to drive awareness of 504 program

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GRAND RAPIDS — Creating greater awareness of U.S. Small Business Administration lending programs ranks as the top priority for the new head of the Economic Development Foundation.

Mark Davis succeeded Sandra Bloem as president and executive director of the Grand Rapid-based Economic Development Foundation, which coordinates lending to small businesses through the SBA’s 504 lending program.

Michigan generally lags other states in SBA 504 lending volumes, Davis said. The program has a significantly higher rate of use especially in states on the West and East Coasts as a way to finance commercial real estate projects, he said.

“The 504 program, as a financing vehicle, is still way underutilized in the state of Michigan. The (certified development company) industry as a whole has much more work to do,” Davis said. “Until we’re fully tapping the market in getting the 504 out there in a way it should be, compared to other more-established markets, this is going to be our focus.”

The EDF also plans to add a loan officer in Southeast Michigan and expand in Southwest Michigan.

Part of the effort to expand the use of 504 lending is breaking down an “old perception” that SBA lending comes with a heavily bureaucratic process for both borrowers and banks and “takes forever,” Davis said. Rather, the paperwork is “virtually the same” as a conventional bank loan and is handled by organizations such as the EDF, he said.

“Nine times out of 10, it’s just a grave misperception, and that’s what we have to overcome in the market,” Davis said. “It’s just a story that needs to be told and told and told.”

A veteran SBA lender, Davis joined the EDF in 2013 as a business development officer. He has been involved in SBA lending since 1998 and previously spent six years at Resource Capital, working the western and southeastern Michigan markets.

“He is experienced and knows the company, the market and the Small Business Administration’s policies for the SBA 504 and 7(a) loan programs,” said Dan DeBaar, president of the EDF’s board of directors. “EDF could not be in better hands.”

The EDF serves as one of six certified development corporations in Michigan and more than 260 nationwide that coordinate loans under the SBA’s 504 program. Eligible borrowers can get an SBA-backed 504 loan of up to $5 million for 10 to 20 years. They may use 504 funds to buy property or buildings, or for constructing or renovating an existing facility.

Under the 504 program, a borrower provides 10 percent of their capital needs. A partnering bank then covers 50 percent and the CDC provides the remaining 40 percent that’s guaranteed by the SBA.

Through the first nine months of the federal government’s 2015 fiscal year, the SBA backed 132 loans totaling $70.8 million in Michigan through the 504 program, which compares with 151 loans for $66.9 million during the same period in the 2014 fiscal year.

The EDF had the second highest volume among CDCs in the state, handling 37 loans for $15.4 million through June 30.

JPMorgan Chase Bank was the top 504 lender in Michigan during that period, with 13 loans for $5.9 million, followed by Chemical Bank with 10 loans for $5.5 million and PNC Bank at nine loans for $4.0 million.

In the SBA’s other primary lending program, 7(a), volumes for the 2015 fiscal year through June were up from a year earlier, although the overall value of the loans declined sharply.

Banks in Michigan wrote 1,783 SBA-backed 7(a) loans for $304.3 million during the first nine months of the fiscal year, versus 1,558 loans for $441.1 million in the same period of the 2014 fiscal year. Huntington Bank was by far the largest 7(a) lender with 951 loans for $79.5 million.

Read 2861 times Last modified on Monday, 28 September 2015 11:00

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