BY BILL FREEHLING
Many area business owners are trying to buy the buildings they lease to take advantage of lower interest rates and real estate prices.
Those were among the remarks made by presenters yesterday at the "Financing for Small Business Growth" seminar at Germanna Community College's campus in Spotsylvania County.
A lot of the loans REDCO has been doing involve tenants buying buildings from landlords, said Jeff Rouse, senior business development officer for the Fredericksburg-based organization. Some building owners are receptive to selling.
Rouse told the several dozen people in attendance that businesses looking to buy buildings or other real estate needed for expansion can obtain 20-year fixed loans through REDCO's 504 program for about a 5.6 percent interest rate.
"Now is a very good time to get a loan," Rouse said.
The 504 loan program is run through the U.S. Small Business Administration. It helps businesses buy land, buildings, machinery, equipment and other long-term fixed assets. REDCO, which stands for Rappahannock Economic Development Corp., is a nonprofit that helps businesses gain access to the 504 loans.
The loans are primarily for small businesses that couldn't quite qualify for a conventional bank loan on their own. REDCO provides a guarantee to the lender of a portion of the loan, typically 40 percent. That reduces a bank's risk, making it more likely to lend and lowering the interest rate. The customer puts 10 percent down, and the bank lends the remaining 50 percent.
Rouse said REDCO's portion of the financing typically can't exceed $1.5 million per loan, but he said Congress is considering a bill that would push that to $5 million. Only for-profit small businesses qualify.
Even if they're not looking to buy the building, tenants should contact their landlords to see if they can negotiate better lease terms, said Brian Baker, executive director of the Rappahannock Region Small Business Development Center.
Small businesses are the key to a U.S. economic recovery, Rep. Rob Wittman said to kick off yesterday's seminar.
'If we're really going to turn things around it, has to start with small businesses," the Republican congressman said.
Germanna, which sponsored yesterday's seminar along with the area's economic development offices and others, is offering discounts on work force training and facility rentals for new and expanding businesses.
Ronald Bew, director for the Richmond office of the U.S. Small Business Administration, also said this is a great time for people to apply for an SBA-backed loan. The 3 percent fees that businesses have to pay for the loans have been waived as part of the American Recovery and Reinvestment Act of 2009.
Bew said the volume of SBA-backed loans has declined over the past couple of years because of economic weakness and problems in the secondary market in which investors buy the loans. He said that secondary market is improving, which would help loan volume.
Bill Freehling: 540/374-5405
Email: bfreehling@freelancestar.com