News Column


August 19, 2014

By Mark Stayton, Skagit Valley Herald, Mount Vernon, Wash.

Aug. 19--Anew revolving state loan program is making capitalinvestment loans easier to access for small businesses working through their local bank.

The new Collateral Support Program recently introduced by the state Department of Commerce lowers the risk banks take when financing certain businessbuilding loans guaranteed by the Small Business Administration.

The administration's special "504" loans are designated specifically for businesses purchasing real estate, buying or improving facilities or investing in heavy equipment.

The program provides a cash collateral for small businesses that lack the necessary collateral to qualify for a bridge loan, before the SBA-guaranteed loan is in place.

With the cash collateral provided by the program, risk for the lending bank is reduced in the months before the SBA loan closes.

"It's kind of like a parent co-signing for a kid's first car through that four-month period," said Scott DeGraw, commercial lender with Bank of the Pacific in Burlington, a partner bank of the program. "It's going to be a real plus for people who can't come up with collateral for three to four months before the SBA loan closes."

The aim of the program is to help make the special SBA loans available through community banks that may not have the tolerance for risk or lending limits of large national banks, said Jane Swanson, Department of Commerce program manager for the Small Business Credit Initiative.

"Of course the smaller banks have smaller lending limits," Swanson said. "We find the small banks in rural areas are often the most impactful in helping businesses."

Swanson said many small businesses' collateral was reduced when property values sank during the Great Recession. She said making the 504 loans more available through community banks may help small businesses qualify because they have an established relationship and history with that bank.

The program is funded by the U.S. Treasury Department's State Small Business Credit Initiative, which allows each state to design its own small business support programs in response to local economic conditions, according to Cliff Kellogg, director of the initiative.

Swanson said the new program is using funds reallocated from a capital access program that was not well received by lenders and had no enrollments in 18 months before being cancelled.

The collateral access program was designed to be self-sustaining with a 2- to 3-percent program fee assessed to the applicant, Swanson said, with smaller fees to shorter terms and smaller amounts. She said the funds will ready to quickly redeploy within six to 18 months.

SBA 504 loans are especially helpful for businesses looking to expand or modernize because they require less money down than a traditional commercial loan, DeGraw said -- between 10 and 20 percent down for an SBA loan compared to 20 to 40 percent for a conventional one.

Louws Truss used a 504 loan in April 2013 to buy a $3.1 million facility it was leasing in Burlington, said company president and co-owner B.J. Louws.

He said with the money saved on the loan down payment, he was able to invest in trucks, saws and equipment to make his company more efficient and competitive.

"It allowed us to use the capital we had wisely. It helps us compete with companies that have more access to capital," Louws said.

"The Collateral Support Program offered through the Washington State Department of Commerce is exciting to SBA for a variety of reasons, including how it will make our job creation-focused 504 Loan Program even more accessible to our lending partners and the small business community," said Mark Costello, SBA Seattle District Office supervisory lender relations specialist.

Reporter Mark Stayton: 360-416-2112,, Twitter: @Mark_SVH,


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Source: Skagit Valley Herald (Mount Vernon, WA)

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