Main Street Wednesday: A New SBA 504 Lender on the Block
February 4, 2015
By Bob Coleman
Editor, Main Street Wednesday
Bob Coleman: Chris Hurn, Fountainhead Commercial Capital, congratulations, what’s this all about?
Chris Hurn: Thanks Bob, thanks for having me. Well I have been in the SBA space for about 17 years now so I decided to launch my next venture. It has been a good six plus months in germination and here we are, Fountainhead Commercial Capital. The name Fountainhead means an abundant source of commercial capital so I thought it fit really well. I am going to be doing a lot of what I have been doing over the last decade when I help build up my previous firm into a groundbreaking SBA 504 lender. I am going to be doing all the stuff I used to do and more, I will have more announcements in the next few weeks.
Bob Coleman: Chris, 504 lending volume is down, it’s a tough product these days because of interest rates. How optimistic are you with this niche?
Chris Hurn: I am very optimistic, quite candidly I predicted this three years ago when refi’s and FMLP went away. Without reinstating refi I felt like 20-30% reduction in volume was going to happen. And across the board it’s been down about 20% per year for the last couple of years. So some people would look at that and say wow, this is a tough time to come into the industry but I think the industry needs me to come back. I think the industry needs me to get involved. We did some groundbreaking things in the past and we are going to do some groundbreaking things moving forward and I still believe it is a tremendous loan program that does not get the due it deserves. It needs people to champion it and I have been doing it for well over a decade and I am going to continue so hopefully we can get some volume up. We will be able to work with a lot of the same people I have worked with in the past and really push this program to the forefront of where it needs to be. It’s interesting, the 7(a) volume doesn’t look like it is down that much which is interesting. I continually believe that the 7(a) program is a great program, but applied to certain instances. I still think commercial real estate is the best product when done with a 504 loan.
Bob Coleman: We will leave the discussion of 7(a) vs 504 for a later day, but I do want to talk about one hot topic, that is the secondary market for 504 loans. Still problematic, we had a huge player who is having some issues. How strong is that market? And bluntly for your company to be successful you need to have a strong SBA 504 secondary market.
Chris Hurn: Yes, and that is part of the reason that volume is down and there are a number of different reasons but that certaintly is a contributing factor. Let’s face it, the secondary market for 504 first mortgages has shrunk by about 90% over the last 4-5 years. It is very problematic as you say, but be on the lookout for some important announcements coming ahead in that regard because I think it is a great opportunity to be optimistic these days.
Bob Coleman: Very good. You obviously need a lot of capital, how are you structured?
Chris Hurn: We are a limited liability corporation, we are a non-bank lender. Banking has always been a very heavily regulated industry and it has become more so in the last 4-5 years, always with the best intentions of course, but we know sometimes the road to hell is paved with best intentions. There is a lot of constraints in the banking world in the last few years so I think a lender like mine is perhaps best served outside of the banks and that is why I have done this. I started as a non-bank lender, I help sell the company Mercantile to a bank and I would have loved to spun it out but things happen and circumstances occurred. The bottom line is I think I can help more small business owners create wealth through commercial property ownership outside of the banks umbrella. Candidly I will be working with a lot of banks, credit unions, and non-bank lenders around the country and I am excited about that. I really don’t want to take deposits or do lines of credit or provide some of the other services banks do. I am trying to stick to my niche, which is SBA 504’s and eventually we will probably expand and do some other commercial loan programs but I think I can make the most impact in the entrepreneurial community by doing what I have been doing for some time.
Bob Coleman: Chris I know that you are well capitalized, you may have dodged that question which is fine.
Chris Hurn: Haha, Yes I am very well capitalized, I have some great partners and I am very excited and I have a lot of capacity. I am very busy with calls and people are flying in to meet with me for positions because as you know I am hiring. We already have six employees, we’ll probably have another 5-6 by month end. I am not going to be satisfied doing what I did before by organically growing slowly. We want to make a big impact and hit the ground running.
Bob Coleman: Chris I was going to say your office looks a little sparse, you need a little staffing, how does someone get a hold of you?
Chris Hurn: Well we have a pretty pathetic website at the moment, they can go to fountainheadcc.com. It says it is under construction but it also lists some of the positions that I am hiring for. People can reach me at chris@fountainheadcc.com. I forget sometimes how it was twelve years ago when I started my last company, there is just a lot of administrative stuff to take care of up front. It’s been fun and exciting, I love building stuff, again I am in the shoes of my borrowers. I think that really ties us close to them. It’s going to be a little challenging for a while. Those are the best ways to get a hold of me, obviously you can find me on social media. It’s going to be fun, I have been really enjoying the last four days since I stepped back in.
Bob Coleman: Chris Hurn, President and Founder, Fountainhead Commercial Capital, Congratulations Chris.
Chris Hurn: Thanks Bob
Visit http://www.fountainheadcc.com/ for more information.