7 Bank Problems Solved
1. Reduced Credit Risk: The lender has first lien position at 50% LTV ratio.
2. Exposure Limits while Maximizing Lending: By partnering with the SBA, the smaller lender can entertain larger projects. Larger lenders can limit exposure in certain industries or with certain borrowers. Regulatory concerns are reduced when CRE loan concentrations are reduced.
3. Secondary Market: 504 first mortgage loans can be sold on secondary market reducing Bank exposure to almost zero, retaining customer relationship, and increasing non-interest income.
4. Attract New Customers: 504 loans finance growing companies who become long-term customers.
5. CRA Credit: Participation in SBA 504 loans enables your bank to qualify for Community Reinvestment Act credit on certain projects.
6. Diversify Default Risk: Leveraged lending across more borrower reduces loss in the event of default.
7. Increased Bank Earnings: Your bank loan is priced at your discretion. Banks earn fees from sale premiums and loan fees. More of borrower cash remains in bank deposits with 90% financing.
