As Election Day has come and gone, we hope that everyone had a chance to get out and vote.  We would like to applaud all the candidates that ran in this year's election and congratulate the winners. Now, here are the recent waves MCC has been making in the news...

MCC Leads Region in SBA 504 Loans

"Altamonte Springs - Mercantile Commercial Capital LLC (MCC), a provider of U.S. Small Business Administration (SBA) 504 loans for small business owners who want to acquire or develop their own facilities, has become the largest SBA 504 lender in the SBA's North Florida district office with an 11.5% market share." ~Florida Real Estate Journal, November 1-15, 2004.

The SBA's Northern Region is inclusive of Orlando, Jacksonville and the Panhandle. For the SBA's fiscal year 2004, MCC accounted for 21 of the 183 SBA 504 loans in North Florida. The 504 program has been growing rapidly in North Florida, up from the 109 loans provided in 2003. MCC is approaching their two year anniversary in February and currently has offices located in Orlando, Tampa, Miami and Chicago, with plans to open an office in West Palm Beach before the end of this year.

Debenture Rate Near All Time Low

The debenture rate, which is the interest rate charged for the second mortgage in our 504 loan structure, is nearing an all time low. The rate has been under 7.0% for the last two years and is fixed for 20 years on a 20 year amortization. It is currently at 5.94% with the record low coming this past March with a rate of 5.63%. This interest rate is blended with the rate of our first mortgages to give our borrowers below market fixed interest rates on our 504 loans.

Conventional Loans vs. 504 Loans

By allowing small businesses to put less money down to purchase and minimize their cash flow considerations, MCC makes owning real estate an option for many businesses that may not have the opportunity otherwise. Business owners can use their capital "savings" and increased cash flow to concentrate on growing their business instead of putting it into their real estate, while at the same time receive the benefits of owning versus leasing. The 504 loan provides 90% financing for commercial real estate with low monthly payments at below market fixed interest rates and in the process, creates new jobs for the community. Below is a comparison for your review.

 

	Conventional Bank Loan	Mercantile Commercial Capital, LLC (504 Loan Program)
Loan Amount	75% to 80% of the lesser of appraised value or purchase price.	90% loan-to-cost (90% financing of total project cost, inclusive of renovations, soft and closing costs).
Down Payment	20 to 25% plus closing costs (22 to 27% in aggregate).	10% of the total project cost.
Term	Frequently 5, 7, or 10 years, then a balloon payment.	1st mortgage: 20 or 25 years 2nd mortgage: 20 years Usually 23 years blended. No balloon payments, just interest rate resets.
Amortization	15 or 20 years.	1st mortgage: 20 or 25 years 2nd Mortgage: 20 years Usually 23 years blended. Fully amortizing.
Current Pricing *	Fixed around 6.50% for five years (then has a balloon payment shortly there after) or floating at Prime + 1% (currently 5.75%).   Usually not assumable.	1st mortgage: 5 or 10 year fixed at around 6.6% for five years or 7.25% for ten years, after which, the rates reset.   Floating at Prime + 1.25%.   2nd mortgage: Fixed at 5.94% for 20 years.   5 year fixed blends at 6.31%, fixed for 13 years. 10 year fixed blends at 6.67%, fixed for 15 years. Floating rate on the 1st and fixed for 20 years on the 2nd, blends to 5.97% at the beginning.   Loans are assumable.
Personal Guarantees	Usually has them.	Has them, but for strong credits, can be limited – pro rata by principal partners.
Prepayment Penalty	Sometimes has them, but frequently not.	5 or 10 year options with up to 20% of principal allowable paid annually without penalty.
DSC	Usually 1.2 X or higher with Maintenance.	At least 1.0 X with no Maintenance.
Fees	Usually 0.5% to 1% of loan amount.	Usually 1.5% of 1st mortgage and 1% of 2nd. Blends to 1.28%.
Personal Credit Scores	Usually no less than 650.	Usually no less than 600.

*Rates as of November 2, 2004

 

 

"This is a once-in-a-generation opportunity to lock in rates on a 20-year 504 loan at somewhere around 6 [percent]," says Jim Hammersley, director of loan programs for the SBA, "With rates as low as they are, more people should be taking advantage of that."