The Nevada State Development Corporation has a record level of loan financing. Photo: Adobe Stock

Evan Dickson was concerned. It was shortly after the pandemic broke out, and the president of the Nevada State Development Corporation was ready to see many of the nonprofit's customers go under.

As a result, NSDC, the largest SBA 504 loan provider in Nevada, feared it would also be hit hard.

"We're a small business too, and we're budgeting and we think this could be detrimental to us as a small business," Dickson recalled in a recent interview with the NNBW. "Because we could have a lot of small businesses in our portfolio that fail and have foreclosures. We had planned a relatively tight year. "

That outlook began to change after the government introduced coronavirus aid programs like the Payroll Protection Program to help small businesses keep their workforce busy and afloat.

And as the Nevada economy reopened and consumer confidence rose, entrepreneurs turned to organizations like NSDC to expand and strengthen their businesses through SBA 504 loans, which have long-term funding of up to $ 5 million for the Purchase of real estate, equipment and other fixed assets.

In fiscal 2020, NSDC completed 65 SBA 504 loan approvals, an increase of nearly 23% from the average volume of 53 in recent years.

"I predicted that at best we would have a break-even year, but I'm happy to say I was completely wrong about that," said Dickson.

Evan Dickson

And that trend hasn't slowed down. In fact, NSDC is seeing record levels of loan financing.

By mid-June, the organization had completed 68 loan approvals in the current fiscal year, which runs from October 2020 to September 2021, Dickson said, adding, "I think we'll be up to 80-85 loans close by." our end of the fiscal year. "

Dickson said loan activity in Nevada is a microcosm of what is happening nationwide. The SBA's CDC / 504 loan service center receives more than 1,000 loan packages a month, he noted.

"Processing times for a 504 loan used to be near three to five days," said Dickson. "Now there are 20 working days because their volume is so behind how many deals they close there."

That begs the question: why are SBA 504 loans on the rise and such a popular option for small businesses?

For starters, the loans are structured with 50% credit from a bank or credit union, 40% through an SBA-approved certified development company (like NSDC), and just a 10% down payment from the borrower, said Doreen Lorinczi, VP of Commercial Production at Greater Commercial Lending, a subsidiary of the Greater Nevada Credit Union.

Doreen Lorinczi

"With 504 loans, it's desirable because you've just been through a pandemic so you don't have the same cash flow that you may have had in previous years," Lorinczi said. "And they only have to come down 10%."

Another great benefit of the SBA 504 loans with terms of 10 to 25 years are the low interest rates and the long terms. Since the loan is government backed, the interest and fees are significantly lower than a bank loan.

The SBA sets fixed standard rates on the CDC portion of the loan, which, according to CDC Small Business Finance, fluctuated between 2.5% and 3% in 2021.

Dickson said the NSDC funded about 2.75% of many of its loans.

"The price for this is super attractive," said Lorinczi. "You generally don't see prices like this in commercial real estate. You can see an interest rate from a great borrower in the range of 4%, but for your average borrower it will be between 5 and 5.5%. "

And SBA 504 loans are not just attractive to borrowers.

"As a lender, we want to reduce our risk, and we are only involved in the project for 50% of the property's mortgage lending value," explained Lorinczi. "To come first at this low mortgage lending rate, with a borrower who only got 10% lower in and his company pays the mortgage on it … and if the company rents, you can give them credit for that rent and that shows give them the cash flow available to pay the mortgage … it's like a win-win for anyone to do this program. "

Hence, Lorinczi and Dickson expect continued demand for SBA 504 loans for the remainder of 2021 and beyond. And both said it speaks volumes for small business resilience in Nevada and the recovering economy.

"We're still seeing a lot of volume, and I think we'll keep seeing people trying to get into the program and move on with their loans," said Dickson.

"The entrepreneurship is alive," said Lorinczi. "People didn't let that time stop them from thinking creatively. I think the people of Nevada have seen opportunities that they want to seize. "

Aside from SBA 504 loans, Greater Commercial Lending has been particularly busy providing PPP loans throughout the pandemic.

All told, GCL made a total of $ 737.7 million in PPP loans to small businesses and nonprofits in all 50 states and six U.S. territories in 2020 and 2021, according to a June 22 press release.

According to data released by the Credit Union Times, this represents the largest amount of PPP by any U.S. credit union in the U.S.

In Nevada alone, GCL claims it has issued more than $ 190 million in total PPP loans and has extended 3,364 loans to Nevada companies for an average of $ 56,532 each. According to the GCL, this resulted in 23,104 jobs being retained in the Silver State.

source https://seapointrealtors.com/2021/07/22/sba-504-loan-activity-surging-in-northern-nevada/

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