SBA 504 loans show promise, but not delivering

10/4/2011

The Small Business Administration's 504 loan program was expected to boost jobs by allowing qualified small businesses to cut their mortgage costs and take advantage of low interest rates.

However, the Arizona Daily Star reports that results of the program have been poor since its launch in February.

Only $212 million of the $15 billion allocated for the program - which is intended to last until the end of 2012 - has been processed so far. Approximately 20,000 businesses were expected to benefit from the SBA loan, yet only 265 loans have been accepted.

Industry experts point to restrictive requirements, lack of awareness and lack of credit among potential borrowers as the main culprits for the poor output.

"It's embarrassing, and it's clearly not the intent of the law or the spirit of the law," Chris Hurn, CEO of Orlando-based Mercantile Capital Corporation, told the news source.

The fund's benefits have not been lost on all businesses, however. Las Vegas-based casino gaming manufacturer VSR Industries, recently used a $5.2 million SBA 504 loan to refinance its existing 70,722 square-foot commercial real estate mortgage.