SAN DIMAS, Calif. — Can the Small Business Administration's 504 loan program essentially "eliminate" the 12.25% member business lending cap?
The agency's 504 program provides businesses with long-term, fixed-rate financing for major fixed assets, such as land and buildings. Certified development companies work with the SBA and private-sector lenders to help provide financing. Typically, a 504 project includes a loan secured with a senior lien from a private-sector lender covering up to 50% of the project cost, a loan secured with a junior lien from the CDC (backed by a 100% SBA-guaranteed debenture) covering up to 40% of the cost, and a contribution of at least 10% equity from the small business being helped.
For credit unions, 504 loans can do a number of things, said Kent Moon, president/CEO of Member Business Lending, LLC during a Webcast hosted by the CUSO and WesCorp on July 25. For starters, the program can "literally eliminate" the MBL cap, which current limits credit unions to 12.25% of their assets. The Credit Union Regulatory Improvements Act is aiming to increase the threshold to 20%.
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