Dec. 18 --Property values in Inland Southern California are still low enough to attract small business owners who want to stop being renters and become owners of their own property. That's the kind of transaction that earlier this month attracted an Anaheim -based wholesale produce company, Veg-Fresh Farms , to enter into a deal for a government-backed loan to buy and outfit a production facility in Corona . The company will move to the 187,000-square-foot plant on Rincon Road in 2014. The key factor in the move was a U.S. Small Business Administration loan that allows a business to buy the building where they operate. This type of transaction is known as a 504 loan, and the $23 million loan Veg-Fresh Farms secured is the largest of its kind in the history of Inland Southern California. Over the next few years, the company anticipates hiring 60 new employees at its Corona facility, according to CDC Small Business Finance , a San Diego -based nonprofit lender that assists small businesses seeking SBA loans. Typically, a 504 loan is a fixed-rate deal that gets 40 percent of its funding from a lender such as CDC Small Business Finance and 50 percent from a bank. In this case, it was Pacific Mercantile Bank . But this wasn't typical, said Larry Nuffer , CDC Small Business Finance's director of marketing communications. Most 504 loans that his office handles are between $3 million and $5 million , but in this case, two-thirds of the $23 million loaned to Veg-Fresh was capital furnished by the bank. The federal guarantee and a user-friendly interest rate means the small business owner accumulates equity, but its goal is to free up capital that can be used to expand a business, Nuffer said. "Its whole purpose is to make the rate attractive so small business owners will use it to create jobs," Nuffer said. "It's really an economic development tool." In March, CDC Small Business Finance reported that the number of businesses who had successfully gone after the 504 loans in the previous six months was up 17 percent, but the volume has declined since then, Nuffer said. The interest rates are still low, and if the Federal Reserve Bank ends its policy of purchasing bonds those rates could go up. But with money still on the sidelines, the government shutdown of two months ago and the related bickering could have something to do with the lower volume. "I think people are just a little cautious, and I think if I was watching Congress , I'd be cautious, too," Nuffer said. There are still enough properties that can be purchased for reasonable prices in Inland Southern California, and lenders are willing to listen to interested business owners, said Brandon Sudweeks , CEO of Caldwell Bank Commercial in Temecula . "If you're an owner-operator with a decent business history, meaning you're profitable and not a startup, then any financial institution out there is going to be willing to finance that deal," Sudweeks said. This is, however, a situation that won't last forever, he added. In Temecula , there are three large available industrial properties. If they came off the market the vacancy rate would decline to about 5 percent in that city, which could price some small businesses out of that market. "It's only a matter of time before prices tick up," Sudweeks said. Follow Jack Katzanek on Twitter: @JackKatzanek and check his blog on pe.com/business ___ (c)2013 The Press-Enterprise (Riverside, Calif.) Visit The Press-Enterprise (Riverside, Calif.) at www.PE.com Distributed by MCT Information Services
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