SBA’s 504 loan program fueling commercial real estate growth

Jessica SarterCommercial Lending

After years of extremely dire conditions in the commercial real estate market, new reports suggest major improvements in the sector. Many of the increases in the commercial lending market have likely been the result of record-low real estate prices since the most recent recession, which led to a nationwide drop of 30 percent in valuations.

In recent years, the Small Business Administration’s 504 loan program has been especially active, fueling the commercial real estate lending sector. These loans can be used to purchase buildings, land and long-term equipment, as well as to construct, renovate or upgrade facilities and proceed with other real-estate based ventures.

Notably, as a result of the Small Business Jobs Act, the loan can be used to refinance existing commercial mortgages, though this temporary part of the program will expire on September 27, 2012.

Whether the availability of the 504 loan and its desirable terms have bolstered commercial real estate purchases, or the low prices on office space have caused more applicants to seek out the funding, is irrelevant. The takeaway here is that the sector, which is a strong indicator of economic success, is on the rebound.

Comerica Bank recently released its earnings statement for the second quarter of its fiscal year, showing a 5 percent increase in commercial loans, The Street reports. According to the source, this was the eighth straight quarter that the Dallas, Texas-based lender experienced commercial loan growth.

This lender is among many that have seen recent success with commercial loan distribution, as the Mercantile Capital Corporation announced it distributed 14 commercial property loans in June, valued at close to $70 million. The company further cited that it has distributed a total of 58 commercial loans so far in 2012, and that it is one of the biggest providers of the SBA’s 504 loans.

This marks an impressive 240 percent year-over-year increase in loan volumes for the bank through the first six months of 2012. The company’s CEO, Chris Hurn, expressed his faith in the 504 loan program in a public release.

“The SBA 504 loan program is one of the most effective economic development and job creation programs the U.S. government has to its credit,” Hurn said.

Another firm that has done an impressive job of getting the necessary financing to borrowers through the past few years of economic hardship is BoeFly. The company’s advanced algorithms make for an efficient and effective loan application process that ensures the best match between lender and borrower.