SAN DIEGO—In the first three quarters of fiscal year 2015, the Small Business Administration has provided more than $72 million in SBA 504 loans to retail owners in California alone, TMC Financing‘s SVP Diana Hallal tells We spoke exclusively with Hallal following ICSC about SBA financing for retailers in this region. How would you describe the overall state of SBA 504 lending for retailers on the West Coast?

Hallal: In the first three quarters of fiscal year 2015, the SBA has provided more than $72 million in 504 loans to retail owners in California alone. At TMC, we look favorably on retail as an asset type. What advice do you have for small business retailers with regards to SBA 504 loans?

Hallal: Building ownership is critical for small business owners, especially in hot real estate markets like San Francisco and Los Angeles, where rents are skyrocketing. As rents rise, some business owners are forced to move—they just can’t afford to stay—and the move can be devastating, especially to retailers who depend on foot traffic. Location is critical for the survival of a growing retailer. Owning the building puts the business owner in control and stabilizes occupancy costs. Cash flow is so important to young businesses, and the SBA 504 loan has a much lower down payment—typically 10%—so business owners can keep more capital working to grow their business. On the up side, with the rising values of real estate values across the West Coast, many of my clients say owning their building was the best retirement asset they never planned. What types of small business retailers are you seeing have the most interest in SBA 504 loans? Why?

Hallal: We see all types of retailers: clothing and accessories, sporting goods, furniture, hardware, liquor, gifts—you name it. Franchises are a good fit for the 504 program. And even the types of businesses you see around retail centers—restaurants, bars, gyms, dry cleaners—find the 504 program makes the most sense for their business. Any business that would rather keep their cash working to grow the business rather than in the ground should consider an SBA 504 loan.

Going in, some business owners are worried the process to purchase will be difficult, but we work seamlessly with their brokers and lenders. It’s really not very different from the traditional mortgage process. The advantages of the low down payment and having a certified development company, like TMC, guiding you through the process make a winning solution. 

Often we see retailers choosing the 504 loan when building or renovating a space because they can roll the purchase and construction or tenant-improvement costs into one financing package with a long-term fixed rate. Also, the 504 program provides financing incentives when energy efficiencies are implemented, and US veterans can receive up to $3,000 to offset loan expenses. How does an SBA 504 loan differ from other business loans?

Hallal: The biggest differences are the lower down payment and fixed interest rates for up to 20 years.

Conventional and SBA 7(a) loans typically require more down, have variable rates or shorter terms. The 504 loan is supported by the US Small Business Administration and is specifically designed to help businesses buy commercial real estate and other fixed assets, such as equipment. So to buy, build or renovate commercial real estate properties, or to purchase equipment that has a life expectancy of 10 or more years, the 504 program is hard to beat.

A 504 loan is a second mortgage on top of a conventional first mortgage, so lenders are taking less risk and thus willing to grant better terms. To learn more about how it works, visit How do you expect the 2016 SBA 504 lending environment for retailers to differ from 2015?

Hallal: At TMC Financing, we’re expecting continued growth. We see no change in the appeal of financing retail properties using the SBA 504 loan program.