Lakeshore 504, a U.S. Small Business Administration niche lending program, processed 11 new loans totaling $5.28 million during the fiscal year that ended Oct. 1.
That more than doubled the lending volume of the previous year.
The Holland Area Chamber of Commerce administers the program in the nine-county southwest Michigan region.
Most of the loans were in Ottawa County. The largest within the region was a $1.05 million loan for a small manufacturing firm in Holland. The smallest was $99,000 for a Blimpie sandwich shop in South Haven.
Lisa Luckey, business development manager for the Holland Area Chamber who runs Lakeshore 504, says she has set a goal of at least a dozen loans for the 2003 fiscal year.
Luckey explained that part of the reason for the program’s increased volume in the past year was that interest rates were at the lowest point ever for the program. In September, the 504 program offered a fixed, 20-year rate of 6.3 percent.
The program uses a mix of federal and bank funds for start-up and growing small businesses.
Lakeshore 504 has also significantly stepped up marketing in the last two years to make more small businesses aware of the SBA lending program, which offers longer terms, lower rates and requires a smaller down payment than borrowing from a private bank.
“We’re here and we want to grow,” Luckey said. “It’s an affordable program.”
Under the 504 lending program, named for the SBA code that regulates it, the federal government provides 40 percent of what a small business needs. A partnering bank provides 50 percent of the loan and the business owner must secure the remaining 10 percent from another source.
Businesses must meet certain criteria and goals to become eligible for a 504 loan, including creating new jobs.
Businesses can borrow up to $1.3 million for a maximum of 20 years and must have a net worth of less than $7 million or a net profit of no more than $2.5 million in the previous two years.
Eligible uses for 504 loans include the purchase of land or an existing facility, buying or constructing a new facility, improving an existing building, and upgrading machinery or equipment with a 10-year useful life.
Banks of late have become more aggressive in steering commercial borrowers toward the 504 program, enabling them to still provide part of the capital a business needs, yet reduce their own lending risk.
Quite often small businesses seeking an SBA 504 loan won’t qualify for the full amount from a bank.
“They don’t provide the normal comfort zone for banks,” said Tricia Ryan, vice president for economic development at The Chamber of Commerce in Grand Haven.
The Grand Haven chamber markets Lakeshore 504 loans in northern Ottawa County and Muskegon County and plans to soon revamp efforts in hopes of drawing more small businesses to use the program, Ryan said.
“This is going to be a big push for our chamber,” Ryan said. “We see a lot of potential out there.”
A recent change in another SBA small business lending program, known as 7A, may also help to drive up 504 volumes. The SBA has lowered the cap for a 7A loan to $500,000.
Information on Lakeshore 504 lending can be found at www.lakeshore504.org.