Mainebiz

W W W. M A I N E B I Z . B I Z 29 A P R I L 5 , 2 0 2 1 F O C U S B A N K I N G / F I N A N C E / I N S U R A N C E lager, and a five-barrel "brewhouse" to make pilot batches — part of a planned expansion. When the pandemic zeroed out draft sales, he also needed more canning machinery for his growing retail mar- ket. All together, he'd need $750,000. Coming from a finance career, Dorsey was aware of the SBA's programs since starting the business in 2015. But he didn't realize the 504 covered equip- ment as well as real estate. His regular lender, Bangor Savings Bank, suggested the 504 for its lower interest rate and brought in Collins. "is was a very flexible program and it was also smooth and quick," says Dorsey. Between the underwriting and application, the process took about six weeks. e parties did the closing together. Dorsey views the program through both his finance and small-business lenses. "I think it's absolutely critical," he says. "It would be devastating to Maine's economy and to businesses if those vehicles went away." Falling into place At the Frog & Turtle Gastro Pub in Westbrook, busi- ness was booming before the pandemic. e own- ers wanted to build a second story to add capacity. Without the 504, they wouldn't have been able to, says Guy Cote, one of the pub's partners. Cote came across the program in an article, talked with his bank, Evergreen Credit Union, and with the Southern Maine Finance Agency, a CDC in Biddeford. "Everything fell into place for what we wanted to do," Cote recalls. Interest rates on a conventional loan alone "would have put the project out of reach," he says. Cote found it took about six months to get the loan. "ere were a lot of hoops to go through," he says. But, he adds, he had plenty of help navigating the process. "It can be a time-consuming process," agrees Southern Maine Finance Agency's president, Will Armitage. "Because of the federal component, there are a few more steps required than with a conven- tional loan. But at the end, when you get approved, you get the benefits of a lower interest rate and a lower down payment." Armitage explains how a loan pans out with and without the 504. Say a borrower needs $950,000 for hard costs (real estate, renovations, equipment) plus $50,000 in soft costs (fees and taxes), for a total of $1 million overall. With 504 financing: e third-party lender provides 50% or $500,000. e 504 portion is 40% or $400,000. e borrower contributes 10% or $100,000. With conventional financing: e third-party lender provides 80% of the hard costs, or $760,000. e borrower contributes 20% of the hard costs plus 100% of the soft costs, or a total of $240,000, which is $140,000 more than the 504 deal. Peace of mind NBT Bank's Morphew, who worked on the AutoMile deal, says the 504 program is beneficial for banks, help- ing them mitigate risk while still allowing them to retain a first-lien position. At the same time, borrow- ers "don't have to worry about injecting their whole life savings into a project," he says. "ey don't have to worry about their nest egg being exhausted." L a u r i e S c h r e i b e r , M a i n e b i z s e n i o r w r i t e r , c a n b e r e a c h e d a t l s c h r e i b e r @ m a i n e b i z . b i z WANT TO BUILD A BUSINESS YOU LOVE? From Wicked Fast working capital loans to business advice and policy advocacy, CEI is here to help Maine's small businesses. 207.504.5900 www.ceimaine.org We are here for you. Business Property and Liability Insurance Products Cyber and Data Breach Liability Insurance Employment Practices Liability Insurance, EPLI & Equipment and Mechanical Breakdown I N S U R I N G M A I N E B U S I N E S S — I N S U R I N G M A I N E P E O P L E We've been in business more than 140 years, and continue to innovate by providing you a portfolio that offers the kind of protection your business needs — today. Innovative solutions for today's business challenges. Visit Patrons.com to find an independent Maine agent near you. NBT Bank's Wayne Morphew says the 504 program helps third-party lenders mitigate risk while allowing them to retain a first-lien position. P H O T O / C O U R T E S Y N B T B A N K They don't have to worry about their nest egg being exhausted. — Wayne Morphew NBT Bank

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