WASHINGTON, DC-Yes, Virginia (or rather Georgetown), there are some conduit lenders out there that will underwrite small loans, even under $5 million. They are just few and far between, Aztec Group’s Charles Penan tells me.

Penan and Howard Taft secured $3.5 million to refinance a small commercial building in Georgetown. The mixed-use retail and residential property owned by a local businessperson, located at 3301 M St., is home to Georgetown Cupcake and Qdoba Restaurant. There are also 10 rental units.

Incidentally, the reality TV show, DC Cupcake is filmed on location at Georgetown Cupcake. While that likely didn’t make a difference to the New York-based conduit lender, Ladder Capital, you never know. “Deals of this size by conduits are hardly ever financed,” Penan says. Before the financial crisis, all of the conduits had designated small loan program. Those, however, folded up with the meltdown.

Now, Penan says, only Wells Fargo is active in this area. Even Ladder does not have a formal SMB conduit loan program in place--it just happened to like this building and its fundamentals and decided to provide the fixed-term financing.

“In general, it is still very tough for small real estate loans to be financed by conduits,” Penan says. Ladder is securitizing this loan within the next 30 to 60 days. Meanwhile Aztec Group, sensing a slow, slow thaw in this area, is shopping a few other DC-based small loans to conduits. “We have about $15 million in total that we are packaging up now with plans to take to market,” he says.