Some Very Interesting Findings about Financing America’s Entrepreneurs…

Fountainhead 504SBA 504 Blog0 Comments

Happy Fountainhead Friday!

In reviewing some data earlier this week on commercial real estate financing for America’s entrepreneurs (directly from the SBA), we were a bit shocked by what we found:

  • Only 68 lenders (out of 1,545) provided at least one (1) SBA 504 loan a month in the past fiscal year (the government’s fiscal year ended September 30, 2015).  That’s national data.  And yes, that’s it’s just 4.4% of all those lenders at a level we here at Fountainhead would deem necessary for competence.  4.4% is all!

Now, you may not know it, but there are approximately 6,100 banks left in this country and around 7,000 credit unions and/or non-bank lenders capable of doing SBA 504 loans.

  • However, of those, only 11.79% even bothered to provide at least one (1) SBA 504 loan in the past fiscal year.
  • And if we dig a bit deeper, of that total universe of possible lenders all over the country… a stark 0.52% are at our minimum “competence level,” meaning twelve or more SBA 504 loans closed in the past year.

We consider this just a tad shocking.  When only 0.52% of all capable lenders in America provided one of the smartest wealth-creation tools for owners of small and midsized enterprises – the very people creating so many of our jobs as THEE engine of our economy – something’s wrong.  You may now understand why I’ve often called SBA 504 loans the “best-kept secret in commercial financing.”  We need to change this.

Like in all areas of life (what I tell my kids):  competence comes from practice.  This is exactly why we advise prospective borrowers and their commercial real estate brokers NOT to be guinea pigs with inexperienced lenders, just because they said they could do an SBA 504 loan for them.  Just because someone could do something, doesn’t necessarily mean they should.  I could cook you dinner, clean your house, and build you a new website… but trust me when I tell you that I probably shouldn’t.  Why?  I’m not very good at those things.  I’d rather focus on my strengths if I’m to deliver value to you.  The same thing applies in business.

Not surprisingly (in some ways, with our focus), we placed #39th on the list of most active SBA 504 lenders through 9/30/15.  BUT, but we had only been in business for seven (7) months, had only closed loans for five (5) months, and had all sorts of restrictions and constraints imposed on us in our first year of business.  I’m pretty sure NONE of the thirty-eight lenders ahead of us on that list had the types and frequency of obstacles that we did starting out.  Also, interestingly enough, we had to carefully go through the SBA’s data looking for our loans because their filters didn’t identify us initially (presumably because we were so new and didn’t have a “indicator” assigned to us).  DOH!

So why are we sharing this with you?  The bigger business lessen for you is this:  in very fragmented marketplaces (such as ours), opportunity abounds to grow and capture market share.  They’re practically crying-out for consolidation and for a market leader….a true market specialist!  Perhaps this applies in your industry, too?

As you are probably tacitly aware, we live in a Specialist economy now.  There is diminishing demand for generalists.  Specialists move faster and offer better terms & conditions than generalists.  Specialization creates focus; focus requires routine; routine enables creativity/ innovations.  All of these result in increased growth, market share, and enterprise value.

We focus exclusively on a very “aspirational” product (SBA 504 loans), so demand is always there, in good/bad economic times.  Most business owners of small to midsized companies want a “home” for their business for “wealth-creation” purposes.  This, and the fact that ownership is usually cheaper per month than leasing, is what drives this dynamic.  We offer one of those very rare products that literally “sells itself”… once prospective borrowers knows about it, because it’s clearly superior to alternatives for owner-occupied commercial real estate ownership.

If you want to help your clients, people you know, and us (in becoming the Dominant SBA 504 lender around), please reach out to us today.  You’ll be glad you did.  Enjoy what we call “Fountainhead Friday”!

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