BoA Reaches Out To Small Businesses With New SBA Loans

In an effort to create more jobs, Bank of America has teamed with CDC Small Business Finance to create a pool of U.S. Small Business Administration 504 first-mortgage loans for sale under SBA’s new secondary market program.

Bank of America’s purchase of these loans allows loan originators to make more credit available to small businesses.

Bank of America initially purchased $27.2 million in SBA-504 loans and created an SBA guaranteed pool of $25.6 million for distribution to investors. The SBA-504 program is intended to provide financing for the purchase of fixed assets, such as real estate, buildings and equipment.

"The secondary market for SBA-504 loans has been nearly frozen for two years," said Kurt Chilcott, president of CDC Small Business Finance, the largest CDC SBA-504 lender in the U.S.

"We appreciate Bank of America’s leadership and effort to work through the complexities associated with this new program. We’re confident this action will kick-start SBA’s secondary market, generating new liquidity for banks so they can expand small business lending, help stimulate growth and support new job creation."

In a 504 loan, which small businesses use to buy commercial real estate or large equipment, the transaction has three elements: a first mortgage from a bank for 50 percent of the project cost; a second mortgage from a Certified Development Company (CDC) covering up to 40 percent of the cost and backed with a SBA guarantee; and a 10 percent down-payment from the small business borrower.