Davis: u201cThe challenge is finding something that's for sale that isn't being gobbled up by investors.u201d

IRVINE, CA—The interest level among owner-users for financing acquisitions via SBA 504 is on the rise, Jennifer Davis, SVP business development for locally based TMC Financing, tells GlobeSt.com. Potential owners are seeing the upside to buying their own properties through this financing program, particularly while interest rates are low.

TMC recently provided an SBA 504 loan through Union Bank for hospitality-management firm Casa Resorts to acquire a corporate headquarters building here for $1.2 million. The broker on the project was Lee & Associates; both the bank and the broker are based in Irvine.

The project, located at 84 Discovery Dr., features a 3,968-square-foot office condominium. The financing enables Casa Resorts to purchase an additional office location, make interior upgrades to the building and retain working capital.

According to Davis, “Casa Resorts was looking for office space that would meet their expanding operations. With the help of an SBA 504 loan, they will be able to accommodate the growing staff successfully, with additional space to add more jobs in the near future.”

Davis tells GlobeSt.com that the biggest issue with owner-users using SBA 504 financing is finding available inventory. “The challenge is finding something that’s for sale that isn’t being gobbled up by investors.”

Once that issue is resolved, however, SBA 504 provides owner-users with a great opportunity for fixing occupancy costs and locking in low interest rates, all for 10% down on the property. “Many users can’t get over the fact that they can do 10% down and they didn’t know about it,” says Davis.

There are few restrictions for borrowers, she adds. “The property does have to be 51% owner occupied, and they need to do that within 12 months. They can get a short-term lease on the property for a portion of it if they’re eligible.”

Despite imminent rising interest rates, rising prices make the opportunity of closing a deal with 10% down more attractive to potential owners. “Inventory is low, and you can use 10% down payment as opposed to having to come up with 25%,” says Davis. “And if interest rates bump up a little bit, there’s still a borrower where this makes sense for them to retain their capital and reduce their down payment. They may be looking at a blended rate between the bank and the SBA, but the opportunity to potentially grow their employee base and fix occupancy costs means this choice makes a lot of sense.”

As GlobeSt.com reported earlier this month, the SBA 504 financing environment is extremely active today and continues to improve, according to Barbara Morrison, CEO of TMC Financing. According to Morrison, beginning April 21, the SBA is introducing even more improvements to the program, making it easier for businesses to qualify for 504 loans.