CRE N Illinois

Small business lending for real estate and heavy equipment in Illinois moves higher

The volume of Small Business Administration 504 lending in Illinois continued to increase given a combination of attractive interest rates, a refinancing capability and opportunistic pricing across all categories of real estate.

The volume of Small Business Administration 504 lending in Illinois continued to increase given a combination of attractive interest rates, a refinancing capability and opportunistic pricing across all categories of real estate.

According to statistics released by the government and compiled by SomerCor 504, an Illinois Certified Development Corporation, 412 loans totaling more than $275 million were approved for the fiscal year ended Sept. 30, 2011 allowing plenty of opportunity for small businesses to grow and expand their operations.

The SBA 504 loan program provides long-term, fixed rate, government-guaranteed loans for small businesses to finance the purchase, construction and renovation of commercial real estate, as well as the acquisition and installation of heavy machinery and equipment. It also provides refinancing programs for small business borrowers.

“If you are a solid-performing business with a well-conceived business plan, it is a great time to be a real estate buyer,” said David Frank, president SomerCor 504. “The SBA 504 program is creating opportunities for businesses to grow and expand their businesses without many of the restrictions of conventional financing programs.”

The $275 million in approved SBA 504 loans represented an increase of 14.86 percent from the same period one year ago when approved loans totaled just more than $240 million. The increase from 2010 levels was an even further increase in the value of approved loans when compared to 2009 when $229.1 million in loans were approved.

The number of deals completed in fiscal year 2011 was 412, which represented a decline of 5.7 percent. It still represents an increase from 2009 when 366 loans were approved in the State of Illinois.

Based on this volume and level of activity, the value of the average loan approved in fiscal year 2011 was $669,200, a 21.8 percent increase from 2010 when the average was $549,300. The 2009 average loan value was $626,030, an amount that is 6.9 percent lower than 2011.

According to Frank, a variety of factors contributed to an increase in 2011 activity because they made funds more attractive and readily available. Among the factors making the SBA 504 loan programs attractive included increasing the amount of the guaranteed loan that can be made by a Certified Development Company like SomerCor 504 increased to $5.5 million from $4.0 million and the net worth requirements of the borrowing company expanded to $15 million from $8.5 million. Additionally, for a period of time, until September 2012, new regulations are making it possible to use SBA 504 loans for refinancing purposes.

“The aggregate of these features and benefits made SBA 504 financing the best financing alternative in the market,” Frank said.

Commenting on expectations for 2012, Frank said he is optimistic that 2012 will be a better year than 2011. He noted that the refinancing component of the SBA lending program will end in September, giving businesses an opportunity to lock in interest rates for the long-term.