The 504 Report - January 2009

Current Rates
January Bond Sale Rate: 6.587% (20 year fixed rate)
	We are celebrating! The 504 rate declined for the second straight month after a precipitous rise in November. Both Treasury rates and the investor spread were down. As noted by our bond strategist “Investor demand for many types of non-treasury securities has revived, and, if sustained, holds some promise for further improvement in spreads.” This is the most optimistic statement we’ve had from our bond strategist since the credit crisis started sixteen months ago.

January 2009

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Loan Servicing Requests

Like many of our banking partners, we are working hard to assist our small business customers facing problems resulting from the declining economy. Thus, both our and SBA’s servicing departments are overwhelmed with requests and work. We are spreading work to other departments to try to be as responsive as possible, but it would be very helpful if our banking partners could notify us early in the process when there is a pending action that will need our or SBA’s approval (subordinations, collateral releases, deferments, etc.). In most cases, the bank works with the customer for some time before contacting us, and between our office and SBA, it could take two to three weeks to finalize an approval and get documents prepared on a servicing action. We want to meet your closing needs, so please keep us apprised of any changes your customer is planning to make.

Advice for Small Business Owners

The Virginia Small Business Development Center Network has prepared a brochure for small business owners called Strategies for an Economic Downturn. The brochure includes excellent tips on managing cash, dealing with accounts receivable and vendors, prioritizing payments, marketing, etc. You can access the brochure online by clicking here or you can call (703) 277-7747 to obtain a copy. If you need assistance, the small business development centers do not charge for their services and have qualified people ready to help you develop a plan to survive this economic crisis.

As a lender, BFG urges that small business owners stay in contact with their lenders. If you have a problem, communicate with your bank and us! If you don’t communicate, you will be viewed as uncooperative, and lenders will be less willing to work with you. We realize that it’s not an easy conversation to have, but ignoring the problem won’t make it go away - it will simply become harder to solve. Don’t wait until there are no alternatives left except foreclosure – contact your lenders early so that we can all work towards a resolution.

Closing Tip

When a small business owner’s project has been completed, prior to closing the 504 loan, we are required to verify that the costs included in the project (meaning loan proceeds for both the first trust and the 504 portion as well as the borrower’s equity) were used for eligible project costs. While we do include both hard and soft costs in the project, we don’t include inventory, working capital, vehicles, taxes, start-up, or marketing costs. Attorney fees may only be included if they are related to zoning or land use issues. Closing costs for the interim financing may be included as well as professional fees for design, appraisal fees and environmental reports. Please contact us if you have any questions about a particular cost you are funding.