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W W W. M A I N E B I Z . B I Z 21 J U N E 1 , 2 0 1 5 Sturgeon agrees with Rider that one of the 504 program's greatest benefits to a small business is that it enables bor- rowers "to inject a much lower down payment into a large real estate trans- action, allowing them to retain those funds for working capital and expenses." e program's relatively low fixed interest rate on the SBA's portion of the financing, she adds, gives the small business owner "predictable payments at a fixed rate for the life of the loan rather than a loan structured with a variable rate and/or a balloon payment, which is more the norm for a commercial real estate purchase when fully financed through a traditional lender." Sturgeon also says third-party lenders participating in a 504 loan "are more likely to make a loan they other- wise wouldn't be able to make and at more favorable terms to the borrower" due to their "first lien position with a very favorable loan-to-value [ratio]." Although she acknowledges SBA 504 loans can take longer to close than a traditional commercial real estate loan simply because they involve more than one lender, Sturgeon notes that if banks involve a CDC familiar with the SBA's underwriting standards early in the pro- cess, the loan's closing can be competi- tive with the time-frame of a traditional commercial real estate loan. "e 504 loan program is a hidden gem for small business owners trying to purchase, build or expand commercial real estate," she says. "It's a wonder- ful tool a small business owner can use to purchase or build the real estate to house their business, to expand their existing real estate or to build equity in something rather than paying rent. ey retain cash for working capital by not having to inject a full 20% to 25% down on the project, they get a fixed-rate loan for 30% to 40% of total project costs for 20 years that they'd never get from a traditional lender, and the bank or credit union serving as the third-party lender gets a much lower loan-to-value [ratio], allowing them to be involved in projects they couldn't otherwise finance." Ja m e s M c Ca rt h y , M a i n e b i z s e n i o r writer, can be reached at jmcc arthy @ mainebiz.biz and @ Jame sMainebiz 1 9 6 5 - 2 015 YEARS OF SERVICE TO OUR CLIENTS AND COMMUNITIES A T T O R N E Y S A T L A W DrummondWoodsum Learn what the Drummond Woodsum Venture Capital & Emerging Companies Practice Group can do for you at: dwmlaw.com 800.727.1941 Drummond Woodsum has what a new business needs: Our attorneys and consultants understand the challenges of start-up businesses. We partner with your management team to provide expertise relationships and business combinations. We Like Start-Up and Emerging Businesses • Business Organization • Tax Planning • Capital Formation • Mergers and Acquisitions • Intellectual Property • Environmental Compliance Protection and Licensing and Permitting READY FOR A FIRST RATE BANKING EXPERIENCE? A Division of The First Bancorp • 800.564.3195 • www.TheFirst.com • Member FDIC At The First we are not your typical bankers – think of us more as friendly business professionals who understand where you're coming from, and very much want to help you get to where you want to go. We're Maine business experts who know the region's industries inside and out – the history, the trends, and the opportunities. We listen to your needs, understand your goals, answer your questions promptly, and make decisions locally, right in the branch. Choose The First for all your business deposit and lending needs. Ready to get started? Call, stop by, or visit TheFirst.com. You've got friends at The First. Bangor • Bar Harbor • Blue Hill • Boothbay Harbor • Calais • Camden • Damariscotta • Eastport Ellsworth • Northeast Harbor • Rockland • Rockport • Southwest Harbor • Waldoboro • Wiscasset The 504 loan program is a hidden gem for small business owners trying to purchase, build or expand commercial real estate. — Diane Sturgeon, SBA's Maine district office

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