BDFC Offers Attractive Business Financing and Refinancing

March 15, 2012

By Teya Vitu

A temporary Small Business Administration loan refinance program can help small businesses save up to 30 percent in monthly real estate loan payments.

This temporary SBA 504 refinancing program can reduce the annual percentage rate of a business loan from a typical rate of about 6.5 percent to about 5.5 percent, said Gary Molenda, president of the Business Development Finance Corp., 335 North Wilmot Road, Suite 420.

BDFC is in the business of hooking up small businesses with SBA 504 loans and refinancing as a private nonprofit corporation dedicated to economic development by providing affordable financing for Arizona businesses.

BDFC has originated 12 SBA 504 refinance loans for $7.225 million, accounting for 67 percent of Arizona loans in this temporary program made possible by the Jobs Act of 2010.

“There’s a window right now to sign up for this refinancing,” Molenda said. “The temporary program expires on September 27.”

BDFC refinances loans ranging from $250,000 to more than $10 million, but these loans must be at least two years old and cannot be federally guaranteed loans, such as SBA 504 loans.

BDFC is an avenue for small business to get financing that a bank likely would not finance on its own.

BDFC partners with banks to add SBA financing to a bank loan, typically reducing a bank’s risk from 75 percent to 50 percent, and thus giving a business owner a better chance to finance or refinance a loan to buy a business property, Molenda said.

“It allows banks to make a deal they wouldn’t ordinarily make,” he said about the refinancing program. “Some businesses have equity and can’t get it out. We can finance up to 90 percent of appraised value.”

This comes into play, for instance, if a business still owes $1 million on a $1.4 million loan. A bank may not touch the equity in this case, but BDFC will consider it.

A BDFC refinance comes with an added bonus: a 20-year fixed interest rate.

“Banks don’t usually do 20-year fixed rates,” Molenda said. “People are saving 20 to 30 percent in monthly payments by refinancing loans.”

These SBA 504 loans and refinances are limited to small businesses, defined as having a tangible net worth of less than $15 million and an average profit of less than $2 million.

BDFC specializes in financing loans for business owners who want to transition from leasing to owning their business property or expand their business. Currently, BDFC has 650 outstanding loans for $280 million, Molenda said.

BDFC has originated loans to eight loans to Downtown businesses totaling $6.8 million. These include the façade improvement for The Screening Room, Beowulf Alley Theatre and the Rialto Entertainment Cener, and other loans to MEB Management Services, Madden Media, Jimmy Johns Gourmet Sandwiches, Thunder Canyon and Broadway and 2nd.

“If someone is renting and wants to buy a building, this is a good program,” Molenda said.

Just because BDFC finances loans or refinancing that banks won’t touch by themselves does not mean BDFC doesn’t use similar standards to decide on whether to issue a loan.

“You still have to be successful and credit worthy,” Molenda said. “The key is a good business plan.”

Business owners can ask about SBA loans at a bank or visit the BDFC office.

“You can start here (at BDFC) and end up with a finished product,” Molenda said.

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