Main Street Wednesday — SBA 504 Has a New Secondary Market Player
Bob Coleman: “Hi we are talking with Chris Hurn, Founder & CEO of Fountainhead Commercial Capital. Chris those look like new offices.”
Chris Hurn: “They are Bob”
Bob Coleman: “FastTrack 504? What is FastTrack 504 and what are you going to accomplish in the marketplace?”
Chris Hurn: “Well it’s our new secondary market program. We hope to give lenders a fast track to getting 504 financing done. As you are well aware of, the secondary market has been pretty anemic over the last five or six years. I think there are a lot of lenders out there that would like to participate, they just don’t know how to. A lot of folks scramble when 504 loans involve construction and renovations. Or when they are trying to find an interim lender so they don’t run afoul with some of the regulations that are out there or how they perceive the regulations. I think FastTrack 504 offers a solution to all of that. I think it’s the first fully outsourced way for lenders to participate in the SBA 504 loan. They don’t have to spend the resources to hire a specialized SBA department. I think with our help we can push this great program out there and help a lot more small business owners.
Bob Coleman: “Two weeks ago I was at the Choice Hotel Owners Council in San Antonio, the brands are Comfort Inn, Sleep Inn, etc. The 504 program is so important for that group, and for Main Street. Does this put 504 back to pre-recession levels?
Chris Hurn: “I don’t know if it will put it back to pre-recession levels but we certainly want to fill the void that has been in the 504 secondary market in time. We are initially going to launch in twelve states and we hope to expand nationwide by early summer. I have heard it so much in the industry that once you decide to do an SBA loan, especially a 504, there is a certain level of complexity for the lender involved. And then if you are going to layer on top of that construction financing as well, which takes another level of skill set, a lot of lenders just don’t want to mess with that. Of course there has been some interim lenders that have cropped over the last few years. FastTrack 504 kind of does away with that. Our whole purpose here is to take the deal from the very beginning stages with a name and a number from one of our participant banks and we’ll underwrite the whole transaction. We’ll work with the CDC’s, we’ll get SBA approval. We’ll get all of the third party reports approved, we’ll close it and fund it. If there is construction we’ll fund that. Ultimately once the debenture takes out the interim second mortgage, we’ll remit premium fees back to the original lender. I think it’s the hands off process that has never really existed in the secondary market before. Frankly I want people to get back to doing what they do best. From SBA’s own data, less than 25% of the SBA lenders in this country have actually done an SBA 504 Loan in the last calendar year. I would like to see those numbers rise. Hopefully if we can help push that forward, the agency will benefit, small business lenders will tremendously benefit, and other lenders will benefit by participating in this program and being more competitive in the marketplace.
Bob Coleman: “What I have appreciated about your program is you have devised an A-Z format. You will fund construction if needed. You do the interim. You do everything. All you really need is a phone call and the bank can take care of their borrower’s relationship, and you will do the long term real estate financing for them.
Chris Hurn: “That’s exactly right. And we’ll also do other eligible proceeds for 504 such as equipment. I have three of those that I am working on right now. I think I have collectively done three of those in the last decade. Maybe it is a testament to American manufacturing coming back perhaps. We are a non-bank lender, so we are not a competitive threat for the banking relationship and other products and services. We want to do one thing and one thing well. That is what our sole focus is. If this allows community banks somewhere out in the Midwest or the far west who have done one 504 loan in the last couple years, I don’t think their borrowers want to be Guinea pigs for them. They probably benefit tremendously by giving their borrower a much better experience working with somebody who works with these programs day in and day out. That is what we are hoping to do. Then turn around and give them non-interest income from that referral. That is really what we are trying to build here.
Bob Coleman: “Sounds like a great program for Main Street, Chris Hurn, Founder and CEO of FountainHead Commercial Capital”
Chris Hurn: “Thanks Bob”
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