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March 2016 Lending Newsletter

Video: What is the Financing Structure of an SBA 504 Loan?

An SBA 504 lending project has three main partners: a third-party lender, a certified development company, and the borrower. Watch this video for details on what percentages are provided by which partners depending on circumstances of the project.

Click below to watch:



SBA-ILP Spotlight: HCDC Helps Thrive Chiropractic Move from Renter to Owner

Thrive Chiropractic, owned by Dr. Pete Haggenjos, was founded eight years ago on Ridge Ave. in Cincinnati’s Oakley Dr Pete - Thrive Chiropracticneighborhood. The office later moved to Mt. Adams and then back to Oakley on Madison Rd. near the Oakley Square. All these moves were spurred because of building leases. Dr. Haggenjos really liked the Madison Rd. location and asked his landlord about possibly purchasing the building instead of renting. The landlord was open to the idea, so he went to a large national bank inquiring about a loan. His experience with this bank was not very positive.

In speaking about the situation to a patient, the patient suggested going to a local bank called Watch Hill Bank (formerly Mt. Washington Savings Bank). The loan officer at this bank advised him that an SBA loan would really benefit his situation and put him in touch with HCDC’s VP Lending, Andrew Young. Andy worked with Watch Hill and Dr. Haggenjos on an SBA-ILP loan for Thrive Chiropractic.

“I am really happy that Watch Hill Bank had the option to collaborate with HCDC because I know first hand from when I tried to work with a previous lender, that rates were significantly better with Watch Hill and HCDC than what the previous lender by itself could offer,” says Dr. Haggenjos. “It’s nice to be the owner of my location. I don’t have to worry about moving when a lease is up. I like the certainty of future cost.”Thrive Chiropractic

The ILP is a revolving loan fund initially funded with a $1 Million loan from the SBA. At this time, all monies have been lent out. As loans are repaid and the ILP account is replenished, HCDC will open the program to new requests.

The SBA’s Intermediary Lending Pilot Program (SBA-ILP) allows HCDC to make loans up to $200,000 to small businesses that may not be able to obtain conventional financing. When a small business has trouble bridging the gap in a commercial loan, HCDC assesses eligibility according to SBA guidelines. Determination of the loan is made locally by HCDC – streamlining the approval process. A start-up business (less than 24 months old) may apply for financing up to $50,000 and an existing business (older than 24 months) may apply for up to $200,000.

The proceeds of a loan from the SBA-ILP may be used to acquire fixed assets, including the purchase of/construction on/or renovation of real estate (except for real estate acquired and held primarily for sale, lease, or investment). An SBA-ILP Loan can be made for machinery and equipment, furniture and fixtures, and term working capital (including inventory receivables, materials and supplies).

 Leasing to Purchase? Read the Fine Print Carefully

Rent to OwnSometimes when a small business leases space for its operations, the lease may include an option to purchase for a set price at some point in the future.  In most cases, an SBA 504 loan can be used to finance this purchase. Read the fine print carefully before signing a lease if your plan is to eventually purchase the space. Some leases  allocate some part of the rent toward the future purchase of the building. If a rent credit is being negotiated prior to signing a lease, it is important to clarify in the lease how the rent credit is being applied.

SBA requires the rent credits be established at the time of the original lease. Some leases will state that the credit will be applied toward reducing the purchase price. This credit will not be part of the borrower equity contribution. Some leases will state that the credit will be applied to the down payment, which will be treated as the borrower’s contribution.  Many times an applicant assumes the rent credit automatically counts towards the equity contribution, but unless it clearly states that in the lease, SBA will apply the credit toward the purchase price. For businesses or clients thinking of entering into a leasing to purchase option with rent credits, be sure it clearly states how the credits are to be applied as this will affect how much borrower equity is required for an SBA loan.

SBA 504 Loan Interest Rates for March:

4.333% at 10 Years
4.553% at 20 Years

HCDC Businesses In the News

Small Biz Gets Big Showcase at XU

Meet Some of the Fastest-Growing Businesses from Cincinnati’s Oldest Incubator: PHOTOS

Six Local Projects Awarded $275,900 in Duke Energy Urban Revitalization Grants

4th Floor Creative Shoots and Scores in First Year

HCDC to Host its First Startup Business Showcase and Innovation Village

HCDC Business Showcase & Innovation Vilalge


Certified by the U.S. Small Business Administration (SBA), HCDC provides growing businesses long-term, fixed rate financing for as little as 10% down in Ohio, Kentucky and Southeast Indiana. As a top SBA 504 loan provider, HCDC has financed more than $1.0 billion in approved projects in the tristate region. That investment means 10,000 new jobs have been created from business growth, contributing to the economic health of local communities.

1776 Mentor Avenue, Suite 100
Cincinnati, OH 45212
Office: 513.631.8292
Fax: 513.631.4887