Connecting Small Businesses to Capital: The Success of 504 Capital Corp.
Four decades ago, 504 Capital Corp. began as a fledgling organization in Chesapeake. Last year, the firm reached the impressive milestone of $1 billion in total project financing, helping small businesses create or retain 9,399 jobs. On May 3, 2021, the company celebrated its 40th anniversary, reflecting on its journey as an organization that connects small businesses to the capital they need to thrive.
Who is 504 Capital Corp.?
504 Capital Corp. is a certified development company (CDC) based in Hampton Roads, Virginia, that acts on behalf of the US Small Business Administration (SBA) to make loans to small business owners. The company partners with leading banks to provide loans to growing and expanding small businesses in Virginia, North Carolina, Maryland, and the Washington, DC metropolitan area.
As defined by the SBA 504 program, a small business is a for-profit business with less than $5 million in annual net income after taxes and a tangible net worth of less than $15 million, according to Kara E. Cournoyer, 504 Capital Operations official.
A Focus on Economic Development
504 Capital Corp.’s specialty is the SBA 504 loan program, which provides up to 90% business financing at below-market fixed interest rates and repayment terms of up to 25 years. The loan proceeds can be used to purchase major fixed assets, such as owner-occupied commercial real estate or heavy machinery and equipment. Small business owners can also refinance existing business mortgages and other business debt under the program, with or without a cash-out option.
The company’s focus on economic development has contributed to its success. Job growth and retention are key eligibility requirements of the SBA 504 loan program, and 504 Capital Corp. takes pride in tracking the number of jobs retained and created in the community.
The company has come a long way since its founding in 1983 as Urban Business Development Corp. and later changing its name to Tidewater Business Financing Corp. Its 2018 rebranding as 504 Capital Corp. aimed to inform current and potential customers that 504 loans are its specialty and the only loan product it offers.
Record High Approvals and Funding
In 2022, 504 Capital Corp. achieved record high approvals and funding. Approvals totaled $82 million, supporting $239 million in total project costs, and funding totaled $45 million, supporting $129 million in total project costs.
Brent Swanson, the company’s president, notes that 504 loans from the SBA are often described as the best-kept secret. The company’s success and long-term goals would not be possible without the valuable relationships it has formed with lending partners. “We cannot make a single loan without a bank or other lending institution on board with us to participate in the financing process,” Swanson says.
The company’s focus on lending only to small business owners is a key feature of its program. This focus ensures that its business financing helps small enterprises thrive and grow, benefitting the communities where they are located.
Expansion and Steady Growth
504 Capital Corp. expanded its reach outside of Virginia five years ago, and it saw steady growth internally, growing from a team of five employees at the start of the pandemic to eight. Seven staff members are based in the Chesapeake office, and one works at the Raleigh, North Carolina location.
The company’s performance over the past five years is also a remarkable achievement, with more than 2,500 jobs created or preserved and 246 small businesses funded since 2018.
Challenges of the Post-Pandemic Business Landscape
Like many other organizations, 504 Capital Corp. has experienced challenges due to the COVID-19 pandemic. However, the company credits government stimulus programs like the Paycheck Protection Program and Economic Injury Disaster Loans with stabilizing many of the same industries served by the company.
Additionally, the pandemic has raised awareness of all of the SBA loan programs, including the SBA 504. Cournoyer notes that the entire industry 504 experienced a record high in 2022.
However, the industry is also facing uncertainty. Rate increases are always a hot topic among borrowers and partners, according to Cournoyer. The company’s 25-year fixed rate is just above 6% as of May 11, and the current prime rate is 8.25%. Lenders can make a loan they might not otherwise make on their own by partnering with 504 Capital.
The Future of 504 Capital Corp.
504 Capital Corp. is an ambitious team that wants to be the most trusted SBA 504 source out there for its partners and borrowers, Cournoyer says. The company plans to continue to help small businesses succeed and grow, providing the funding and resources they need to thrive.
Summary
504 Capital Corp. is a Chesapeake-based certified development company that acts on behalf of the US Small Business Administration to make loans to small business owners. The company partners with leading banks to provide loans to growing and expanding small businesses in Virginia, North Carolina, Maryland, and the Washington, DC metropolitan area. Its specialty is the SBA 504 loan program, which provides up to 90% business financing at below-market fixed interest rates and repayment terms of up to 25 years. Since its founding in 1983, the company has helped small businesses create or retain 9,399 jobs and provided project financing worth $1 billion.
The company’s focus on job growth and retention is a key requirement of the SBA 504 loan program, and tracking the number of jobs retained and created in the community is a source of pride. Through government stimulus programs, 504 Capital Corp. has navigated the COVID-19 pandemic and helped stabilize many industries. Looking to the future, the company plans to continue helping small businesses succeed and grow.
Additional Piece:
Small Business Financing Solutions: The Role of CDCs in Boosting Entrepreneurship
Access to capital is one of the biggest challenges that small business owners face. The costs of starting or expanding a business can be significant. Many small business owners struggle to secure loans from traditional lenders like banks, which may require collateral or a long credit history.
That’s where CDCs like 504 Capital Corp. come in. As certified development companies, they help small business owners access affordable financing to grow their businesses. The SBA 504 loan program, which is 504 Capital Corp.’s specialty, is just one program among many that CDCs can offer.
The SBA 504 loan program is unique because it provides up to 90% of the funding needed for major fixed assets, such as commercial real estate or heavy machinery. The remaining 10% of the funding comes from the borrower’s equity. The loan can be repaid over a period of up to 25 years at a below-market fixed interest rate. This means that small business owners can access long-term, affordable financing that they may not be able to find elsewhere.
CDCs like 504 Capital Corp. are critical to the success of small businesses and entrepreneurship. In addition to providing affordable financing, they also offer technical assistance and training to small business owners. This can include assistance with business planning, marketing, accounting, and other essential functions.
Moreover, CDCs often work closely with local economic development organizations to support the growth and development of small businesses in the community. They can be a valuable resource for small business owners who need help navigating the complex world of business financing and entrepreneurship.
In recent years, there has been growing recognition of the importance of small businesses to the economy. Small businesses create jobs and drive innovation, and they play a vital role in supporting local communities. By providing affordable financing, technical assistance, and other resources, CDCs like 504 Capital Corp. are helping small businesses succeed and thrive.
Conclusion
504 Capital Corp. has achieved great success as a certified development company that connects small businesses to capital. Its focus on the SBA 504 loan program has helped thousands of small businesses access affordable financing for major fixed assets. By tracking job growth and retention, the company has shown its commitment to economic development and the success of small businesses. CDCs like 504 Capital Corp. are critical to the success of small businesses, providing much-needed financing, technical assistance, and resources. As the business landscape continues to evolve, the importance of CDCs to entrepreneurship and economic development will only continue to grow.
Summary:
504 Capital Corp. is a certified development company that provides loans to small business owners on behalf of the US Small Business Administration. Its specialty is the SBA 504 loan program, which provides up to 90% business financing at below-market fixed interest rates and repayment terms of up to 25 years. By helping small businesses access affordable financing, CDCs like 504 Capital Corp. are critical to the success of entrepreneurship and economic development.
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CHESAPEAKE — Four decades ago, 504 Capital Corp. was a fledgling organization.
Last year, the Chesapeake-based company reached the $1 billion mark in total project financing and helped small businesses create or retain 9,399 jobs.
On May 3, 504 Capital Corp. celebrated its 40th anniversary connecting small businesses to capital and driving economic development through job growth and retention.
___
504 Capital is a Hampton Roads-based certified development company that acts on behalf of the US Small Business Administration to make loans to small business owners.
The firm partners with leading banks to provide loans to growing and expanding small businesses in Virginia, North Carolina, Maryland, and the Washington, DC metropolitan area.
A small business, as defined by the SBA 504 program, is a for-profit business with less than $5 million in annual net income after taxes and a tangible net worth of less than $15 million, explained Kara E. Cournoyer, 504 Capital Operations official.
Founded in 1983 as Urban Business Development Corp., it later changed its name to Tidewater Business Financing Corp. It was known primarily as “Hampton Roads CDC” (Certified Development Company) until its 2018 rebranding as 504 Capital Corp.
“The main reason behind the company name change was to inform current and potential customers that 504 loans are our specialty,” Cournoyer said.
In fact, it is the only loan product that it offers.
“We definitely see small businesses as the backbone of the economy, which is why we take so much pride in tracking the number of jobs retained and created in our community,” Cournoyer said.
___
The SBA 504 loan program provides up to 90% business financing at below-market fixed interest rates and repayment terms of up to 25 years.
Loan proceeds can be used to purchase major fixed assets, such as owner-occupied commercial real estate or heavy machinery and equipment.
Small business owners can also refinance existing business mortgages and other business debt under the program, with or without a cash-out option.
For example, the loan can help a small business owner buy the building they’re currently renting or it can help the business build a larger facility to accommodate its growing workforce, Cournoyer said.
“We are proud to support the economic development of the region as job growth/retention is one of the program’s key eligibility requirements,” he said.
___
Brent Swanson, president of 504 Capital Corp., said many people describe federal 504 loans from the SBA as the best-kept secret.
The company’s success and long-term goals would not be possible without the valuable relationships it has formed with lending partners, he said.
“It’s a unique loan product,” he said. “We cannot make a single loan without a bank or other lending institution on board with us to participate in the financing process. Our partners are critical to the success of the program and our organization.”
And, Cournoyer added, the company does not lend to investors.
“A key feature of our program is that we are only allowed to lend to small business owners,” Cournoyer said.
In 2022, approvals and funding reached a record level: approvals totaled $82 million supporting $239 million in total project costs and funding totaled $45 million supporting $129 million in total project costs.
___
“504 Capital has held steady through various business cycles over the decades, but coming out of the COVID crisis with back-to-back record years makes this milestone even sweeter,” said Swanson, who expressed how proud he is of is on the team achievements
The SBA offered a significant amount of government stimulus during the pandemic, such as the Paycheck Protection Program and Economic Injury Disaster Loans, and particularly to industries at risk from COVID, including restaurants, child care, and the hospitality. The pandemic affected many of the same industries served by 504 Capital.
“This has raised awareness about all of the SBA loan programs, including the SBA 504,” Cournoyer said.
Because of that, the entire industry 504 experienced a record high in 2022, Cournoyer said.
“In addition, the stimulus helped stabilize many industries,” he said. “From the beginning of the pandemic to date, we have had no defaults.”
The company’s performance over the past five years is also a remarkable achievement, he said. Since 2018, more than 2,500 jobs have been created or preserved and 246 small businesses have been funded.
___
It’s been five years since the company expanded its reach outside of Virginia.
And it has also seen steady growth internally, growing from a team of five at the start of the pandemic to eight. Seven staff members are based in the Chesapeake office and one works at the Raleigh, North Carolina location.
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“We have created two new positions in the last two years and have plans to hire at least one more employee in the next 12 months,” Cournoyer said.
But just as uncertainty surrounded the days, weeks and months during the pandemic, a different kind of uncertainty hangs over the industry today. Cournoyer said that rate increases are always a hot topic among borrowers and partners.
“To give you an idea of how the SBA 504 rate compares, our 25-year fixed rate is just above 6% as of May 11 and the current prime rate is 8.25%,” he said. “This gives us the opportunity to help our banking partners mitigate their risk during a recession or volatile economic climate.”
Lenders can make a loan they might not otherwise make on their own by partnering with 504 Capital, Cournoyer said.
Looking ahead, he said the company is an ambitious team that wants to be the most trusted SBA 504 source out there for its partners and borrowers.
“We love to see small businesses succeed,” he said.
Sandra J. Pennecke, 757-652-5836, sandra.pennecke@insidebiz.com
https://www.pilotonline.com/inside-business/vp-ib-capital-anniversary-0605-20230531-szvsdn4h4bcuvcjoy5holxvxcm-story.html
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