The 504 Report - June 2007

Current Rates
June Bond Sale Rate: 6.596% (20 year fixed rate)
	Treasuries have moved up slightly, but we are still offering a great 20 year rate!

Business Finance Group Seeking Experienced Credit Analyst

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We have an opening for an experienced credit analyst (3 years experience preferred, SBA under writing experience not essential). We offer a competitive compensation and benefits package plus a great work environment! If you are interested or know someone who might be, please contact Wayne Garcia at (703)667-5041 or wgarcia@businessfinancegroup.org.

Do Franchises Make Better SBA Loans?

SBA portfolio data for both 504 and 7(a) loans indicates that franchise transactions are actually a higher risk for the agency. The failure rate (based on number of loan transactions) and the amount of charge offs are both higher for franchise transactions. The data breaks down as follows:

The Top 5 Performing Franchises (based on dollars lent) from 2000 through 2005 were:
1. Best Western Inn
2. Comfort Inn
3. Holiday Inn Express
4. Culver's Frozen Custard
5. Primrose School (day care)

The Top 5 Worst Performing Franchises (failure rate) from 2000 through 2005 were:
1. Obee's Soup-Salad-Subs
2. Lady of America
3. Country Clutter (Bed & Breakfast)
4. Copy Club
5. All Tune and Lube

The Top 30 Worst Performing list did not include any hotel franchises, but did include restaurants (Godfathers’ Pizza, Blimpie, Mr. Hero, Chicago Pizza) and another auto repair facility, Cottman Transmission. Many of the franchises listed were not common to our area.

Please contact us at info@businessfinancegroup.org if you would like additional information.

Closing Tip

Getting your customer’s 504 loan approved is the beginning – getting it closed is what reduces the bank’s risk. We make every effort to follow up with bankers and borrowers to move transactions along to closing quickly, but if you haven’t heard from us and know the project is close to completion, please give us a call. We’d like to get an early start on the closing process whenever possible!

Additionally, don’t forget that you are only advancing the “net debenture” (the smaller of the two 504 amounts), not the “gross debenture”. The difference between the two amounts are costs related to the 504 closing and bond sale process and are disbursed from the 504 bond sale proceeds. The bank will receive the “net debenture” amount as a pay down.