The 504 Advantage:
Taking the Mystery Out of
SBA Lending
• Presented by:
• Ed Lomasney
• Vice President, Business Banking
BANKING. INVESTMENTS. INSURANCE.
• About Eastern Bank
• Business Credit: A 3-Legged Stool
• The SBA Program at Eastern Bank
– 504 Loan Program
– Other SBA Programs
BANKING. INVESTMENTS. INSURANCE.
About Eastern Bank
• Founded in 1818, largest mutually owned bank in
New England with over 100 branches.
• Largest commercial bank headquartered in
Boston; local decision making.
• # 1 SBA Lender in MA for 5 consecutive years,
process over 500 SBA loans a year.
• Customer Satisfaction – JD Powers & Associates
BANKING. INVESTMENTS. INSURANCE.
Business Credit: A 3-Legged Stool
• Cash Flow
• Collateral
• Character
BANKING. INVESTMENTS. INSURANCE.
Cash Flow / Capacity
• What is your ability to repay the loan?
• How are the proceeds to be used?
• How will they be repaid?
Collateral
• How can your lender be sure of your ability to repay the loan?
• What can you offer the lender in the event of a default?
BANKING. INVESTMENTS. INSURANCE.
Character
•
•
•
•
•
Who are you?
What are your FICO / D&B Scores?
Where is the business located and for how long?
Do you live up to your obligations?
What do your suppliers say about you?
– Are their liens or judgments against you?
BANKING. INVESTMENTS. INSURANCE.
The SBA programs at Eastern Bank:
• Eastern has a number of diverse lending products
for business customers
– 504 Program for Commercial Real Estate and long term
equipment deals
– 7a Program for large equipment purchase, debt
refinancing needs and acquisition of businesses
– Express Program for working capital lines of credit
BANKING. INVESTMENTS. INSURANCE.
Why we are here – the SBA 504 Program
• Finances acquisition of CR/E and major fixed assets
• 20 year fixed rates available
• Power down payment
– 50% 1st MTG with Bank
– 40% 2nd MTG with CDC / SBA
– 10% down from borrower
BANKING. INVESTMENTS. INSURANCE.
Comparison of 504 vs. Traditional CREM:
Down Payment
504 Loan Program
• 10% Required
– Allows borrower to keep
more money in the business
– Takes less time to save for
down payment
BANKING. INVESTMENTS. INSURANCE.
Conventional CRE Lending
• 20% to 30% Required
– With the larger down
payment, monthly payment
tends to decrease
Comparison of 504 vs. Traditional CREM:
Structure
of Lending
Structure
504 Loan Program
• Two Loans
– Bank 1st Mortgage for 50% of
purchase price, see 
– CDC 2nd Mortgage for 40%
– 20-year Fully Amortized:
• 20-year rate lock, 20-year note,
20-year amortization
– No interest rate risk.
BANKING. INVESTMENTS. INSURANCE.
Conventional CRE Lending
•
•
•
•
One loan for up to 80% LTV
5-Year rate lock typical
10-Y note typical, resetting
25-Y amortization
Comparison of 504 vs. Traditional CREM:
An Example, $1MM purchase
504 Loan Program
•
•
•
•
•
Conventional CRE Lending
10% Down Payment = $100K
•
$500K 1st MTG approx. = $2,850/M* •
$414K 2nd MTG = $2,780/M**
•
st
1 MTG Balloon at 10-Years, $380K
•
In addition to normal closing costs, add
$1,250 to 1st MTG. $14K fee on 2nd
MTG is rolled into financing above.
* 4.75%
1st,
** 5.2%
2nd,
25% Down Payment = $250K
$750K MTG approx. = $4,275*
Balloon at Ten Year = $568K
Fees between $10-$20K for
normal closing costs.
* Assumes 4.75% 1st MTG rate
$14K fees financed
BANKING. INVESTMENTS. INSURANCE.
Other SBA Loan Programs at Eastern Bank:
• In addition to the 504 loan program, we have additional
options to help small business owners obtain access to capital
– SBA Express: Preferred Term Loans up to $100,000 (credit scored)
– SBA Express: Preferred Line of Credit up to $50,000 (credit scored)
– SBA 7(a) Program: Used to Refinance existing business debt, purchase
equipment, acquire new business, working capital lines, etc.
– Other options: SBA Preferred Lender Program, Patriot Express, Export
Express, etc.
BANKING. INVESTMENTS. INSURANCE.
Questions or Notes?
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
BANKING. INVESTMENTS. INSURANCE.
Contact Information
Ed Lomasney
Vice President
Business Banking
Direct Line- 781-598-7774
Cell Phone- 978-979-2524
eFax Line - 781-4771369
e.lomasney@easternbank.com
37 Foster Street, Peabody, MA 01960
www.easternbank.com
BANKING. INVESTMENTS. INSURANCE.