South Eastern Economic Development (SEED) Corporation announced today that in spite of a lingering economic recession, it made 110 small business loans totaling $33 million in fiscal year 2011 which ended on September 30. These loans assisted in the creation of 578 new jobs in the region.
“This past year, although the economy was still weak, many small businesses were able to purchase buildings for their operation at lower purchase prices, and the lowest fixed interest rates in years,” stated Maria Gooch-Smith, SEED’s executive director.
“SBA 504 loans, which finance the purchase and improvement of business real estate, and heavy machinery and equipment, provided a steady source of long term debt at fixed interest rates below five percent, frequently with only 10 percent down instead of the conventional 20 to 25 percent,” explained Gooch-Smith. “The lower down payment helped small businesses to take on projects which they might not otherwise, and enabled them to conserve working capital,” she added.
Gooch-Smith explained that 70 loans were made under the SBA 504 Program, 10 were packaged for banks under the SBA 7A Program, and 30 were made under SEED’s small loan programs which provide loans from $1,000 up to $200,000 at low fixed interest rates.
“These loans leveraged over $50 million in bank financing and private funds. Many of the smaller loans were made to businesses which could not qualify for conventional bank financing due to insufficient collateral, and tight cash flow,” stated Gooch-Smith.
According to Gooch-Smith, a commercial property for sale can represent an opportunity for a small business owner who currently leases space, but can consider buying at an advantageous price in this market, thereby lowering monthly payments.
“The SBA 504 Program is the perfect financing option at times like this since the participating bank only has to provide 50 percent of the financing needed, and an SBA 504 loan provides 40 percent behind the bank. In addition, the SBA 504 loan carries a fixed interest rate for 20 years, currently 4.7 percent,” added Gooch-Smith.
Gooch-Smith explained that SBA 504 loans remain a great option for banks, since they mitigate bank lending risk on commercial real estate financing. Funds for SBA 504 loans come from the sale each month of long term bonds. These bonds carry the full faith and backing of the U.S. government, and present an attractive investment option for pension funds, insurance companies and other large institutional investors.
SEED is a non-profit economic development corporation established in 1982 to assist small businesses in the region. Under various programs, SEED makes loans from $1,000 to $5.5 million to assist small businesses to grow and create jobs.
SEED also provides technical assistance to small businesses and works with other economic development organizations and financing institutions in the region to ensure that individuals who are committed to owning and operating a small business are able to obtain the assistance they need to be successful.
For more information about the SBA 504 Program and other SEED loan programs, please call 508-1020 or visit SEED at www.seedcorp.com.
# # #