The 504 Report - June 2008

Current Rates
June Bond Sale Rate: 6.568% (20 year fixed rate)
	While spreads dropped slightly, 10-year Treasury rates have ticked up nearly ½ point since April. We are pleased to see stability in the spreads, as that is a positive indicator for the credit markets.

June 2008

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Reprieve for Implementing New Standard Operating Procedures (SOPs)

SBA has issued a revised version of the new SOP. It will become effective August 1, 2008 rather than June 15th. Many of the comments from the banking and CDC industries were incorporated. We are in the process of developing a training program for our lenders on the impact to the 504 program.

Two significant items for you to make note of:

Gas station properties are eligible, but the requirements imposed by SBA for environmental due diligence, as well as the required indemnification form (must be signed by seller and buyer), will likely eliminate our ability to finance those transactions. We are happy to provide the form of the indemnification agreement up front, as well as outline the environmental requirements so that the parties to the transaction can make a decision about whether or not to move forward with 504 financing.

Appraisals must include SBA as a party to the appraisal at the time the engagement letter is sent to the appraiser. Reliance letters will not be acceptable (according to SBA, the Appraisal Institute has informed them that a reliance letter does not provide the same protections as being named in the initial process).

Real Estate Acquisitions in a Down Economy

Many small businesses are legitimately concerned about taking that big leap into real estate ownership when sales are slowing. For a strong business, this may be an excellent opportunity to find a good deal on the right property, and the 504 program can help reduce the cash required in the transaction. Keeping working capital in the business is important to a successful expansion (as well as repayment of the bank and 504 loans!), and with tighter home equity requirements, business owners have less flexibility for funding their portion of the acquisition. The 504 program includes all the hard and soft costs related to the acquisition in the transaction, reducing the total cash required to acquire real estate by a significant amount. Give us a call for a comparison of conventional versus 504 financing!

Scholarships Awarded

Business Finance Group is pleased to have participated in a scholarship program through ESL Volunteers of Northern Virginia, Inc. One of our staff members, Anne Ryan, volunteers her time to teach English as a Second Language. At a recent graduation ceremony, five graduating students received scholarships for the fall semester. We appreciate Anne’s volunteer efforts and are pleased to support her and her students!