WBD



Jason/Matt Appearance on BizTalk with SCORESpeaker 1:The Fox City SCORE Chapter and WHBY are please to bring you BizTalk. Join Tony and Randy as they talk with entrepreneurs and professionals who share their experiences from starting to sustaining growth. Learn the skills needed for your business to be successful, and get interactive by calling 281-81150. If you missed anything, you can catch the BizTalk podcast at and now, it's BizTalk on WHBY.Tony Busch:Good morning, and welcome again to another edition of BizTalk, we're really happy you joined us on this beautiful Saturday morning, my name is Tony Busch, in the studio this morning with Pat Lowney, good morning, Pat, sitting in for Randy.Pat Lowney:Good morning, Tony.Tony Busch:Glad to have you on board, Pat.Pat Lowney:Glad to be here.Tony Busch:Our show this morning is very good program if you're a business owner and you're looking to finance a project, stay tuned because our guest this morning, our Jason Monnett, who's a senior VP and a senior lender, and Matt Wilcox is a vice president and loan officer with WBD. We're gonna be learning a lot about them and how their program works, and how it can benefit you as a business owner. But I'd first like to just remind you that this show is brought to you each weekend by the Fox City SCORE Chapter. We're located in the Fox City's Chamber Building downtown in Appleton, and that will tell you more about our program, or our chapter throughout the program. If you have a question for our guests this morning, you can reach us at 281-1150, write that number down, because you're probably gonna want to call in.281-1150, and if you're outside the Appleton area, you can reach us on a TDS Metrocom toll-free line. 866-887-1150. So I'd like to welcome Jason and Matt to the show this morning, good morning gentlemen.Matt Wilcox:Good morning.Jason Monnett:Good morning.Matt Wilcox:Thanks for having us.Tony Busch:You betcha, it's good to have you here this morning. Tell us a little bit about yourselves, and then maybe you could tell us a little bit about WBD. Jason, do you want to go first?Jason Monnett:Sure, my name is Jason Monnett, I've been with WBD since 2001. Prior to that, I worked in the commercial lending department associated bank. I worked my way up through the ranks, and now I'm glad to oversee our entire lending team, including Matt, who serves the Fox City's area here.Tony Busch:Great, thanks Jason, Matt?Matt Wilcox:Well, thank you, again, for having us here today. My name is Matthew Wilcox, I have been in banking for over 20-years. The last year I was recruited by Jason and the president of WBD to come over and participate as a loan officer with WBD. Prior to that, I had been in banking since 1994. The last couple years at BLC community bank here in Little Chute as the senior lender. And during my time in banking, I have done over 10 of the SBA 504 loan programs that close in a number of different projects that ended up going to another lender, but went 504, so ... was a big believer in the program, and was happy to join the team here at WBD.Tony Busch:Great, well thanks a lot for being here this morning. What is WBD stand for? And what does it do?Jason Monnett:Right, so we're a non-profit organization that provides access to capital for small businesses to grow and create jobs. And the primary way we do that is through, as Matt eluded to the SBA 504 loan program, which is a great source for long-term fixed rate financing for real estate and equipment projects for small business. And as we'll talk about, we'll cover more of the benefits later, but the key benefits are a minimal down payment, typically, as low as 10% or a contribution is required to use the program, and then that long-term fixed rate as we're offering 20-year fixed rate money at around four and a half percent today through the 504 program.Tony Busch:Fixed for how long?Jason Monnett:Twenty years.Tony Busch:You’ve got my curiosity.Jason Monnett:Right, so we are technically what's called a certified development company, as I mentioned, we're a non-profit organization. We've been around since 1981. Over that time, we've financed over two billion dollars in projects, we've helped create 64,000-ish jobs throughout our territory.Tony Busch:In Wisconsin.Jason Monnett:Yep. So that's the 504 program. There's a couple other things we do, I think it's important to differentiate the SBA worlds a little bit because our expertise with SBA lending in general, we also provide what's called lender services, so we're able to serve as the back room for banks or credit unions that choose us to package their SBA 7(a) loans, and of course, the 7(a) program is a loan program that provides a guarantee to the bank, and will allow the bank to stretch into borrowers and markets that they might not be able to do without the SBA guarantee, so more startup lending and other industries that, for whatever reason, they may not be able to get comfortable financing conventionally.And then the SBA world in general, of course, provides favorable terms, which we'll talk about, extended terms and amortizations which can really help a small business's cash flow. Especially if they're in growth mode. And then the third component of our organization, mentioned 504, mentioned lender services, the third piece as we do some direct lending through a community advantage loan program, we're able to do some direct SBA 7(a) lending for targeted areas and smaller dollar amounts.Tony Busch:Is that community advantage program state-wide, Jason?Jason Monnett:It is.Tony Busch:So what's the size limit on that?Jason Monnett:So our target market, Tony, is loans of 150,000 or less.Tony Busch:Okay. And you mentioned the 504 program and the 7(a) program, and you touched on it, 504 is fixed asset, long-term, 7(a) is, what is 7(a) used for?Jason Monnett:So 7(a) has a more diverse use of proceeds, it's essentially any business expense that small business owner would wish to finance, so you could do term work in capital financing. You could do real estate equipment inventor, et cetera.Tony Busch:Mm-hmm (affirmative). And often times, do these two programs come together when you're doing a 504 loan.Jason Monnett:Yep, absolutely, we'll have a fixed asset need, which can be done via the 504 route, and then there's some other non-504 eligible, non-fixed asset uses where the 7(a) can layer in.Tony Busch:Mm-hmm (affirmative). Matt, tell us a little bit about who's eligible for a 504 loan. Is any business eligible for the 504?Matt Wilcox:No, not any business is eligible for a 504. Non-profits are not eligible. And pretty much any for-profit business, any business that occupies the real estate that they are looking to purchase. The other key components are, they have to have less than a $15,000,000 net worth for the tax return. So a pretty high number to be considered a small business, and they have to have less than $5,000,000 in average net income for the last two years. And then the other thing that's important to note, obviously, as I mentioned, they've got to be on the 504 side investing on real estate or equipment projects in order to meet that threshold for use of proceeds.Jason Monnett:Right, businesses that primarily engage in gambling are not eligible as well.Matt Wilcox:Right. No gambling no non-profits.Tony Busch:Yeah, some business owners might say, "I'm taking a gamble by starting my business." That's a different kind of gamble.Matt Wilcox:Exactly.Tony Busch:So it has to be the kind of a business that really creates jobs, I mean isn't 504, WBD, and S, aren't they really interested in creating jobs?Jason Monnett:Very much so, it's not an absolute litmus test to qualify for the program, but that's why the 504 program was originally founded, to help businesses grow and create employment.Tony Busch:What I really like about the 504 program is what you mentioned, there's only a 10% equity required, many traditional loans require 25, 30% down. That really frees up some working capital for the business to use in marketing their firm, or paying more employees, or growing the company, it's a huge advantage.Jason Monnett:Yep, absolutely.Tony Busch:In terms of funding for the loans, you're not tax-supported. Are you tax payer supported?Jason Monnett:No, so as we'll probably talk about a little while, the end rates to our borrowers that I mentioned earlier include all of the fees associated with the program, so that includes what's called a subsidy fee to the SBA, the federal government.The subsidy fee covers the cost of the 504 program. So we're proud of the fact that we're a zero subsidy program. I've had the pleasure to visit our congressional delegation in Washington, and really, this program continues to have very strong bi-partisan support because of that, we're not quite baseball and apple pie, but we're pretty close—because it's a job creation economic development program. And does not require and tax payer dollars to support it.The other thing I mentioned, which you may ask, Tony, is how does WBD fund itself. And again, the main portion of our income is an additional servicing fee that's priced into the loan rates that I mentioned earlier. So that four and a half percent, 20 or fixed rate money includes both our shim as well as the cost of the government in terms of supporting the program.Tony Busch:You have to keep your doors open.Jason Monnett:Right, you know.Matt Wilcox:Absolutely.Tony Busch:In terms of the eligibility, how long does that take, and if they are going to be doing some financing, do you work with the customer, or do you work with a bank who works with the customer? How does that structure work?Jason Monnett:yeah, so everything we do involves a bank or credit union.Tony Busch:So there's a lender involved.Jason Monnett:[crosstalk 00:09:09] always a lender involved. So the basics of the structure in the 504 program are, typically, there's a third-party lender, as we call them, banker credit union, that will provide a first mortgage loan for 50% of the project, and then our fixed rate piece comes in the second-lean position behind the lender, so it creates a comfortable loan to value for them. And our portion is typically 40-50% of the project, and then the borrower contributes as little as 10% to the project.Tony Busch:Gosh, when I was a banker for 30 years, I did a number of 504 loans, and a lot of SBA 7(a) loans like Matt, but why wouldn't a business owner want to go with a 504 program? If they're spending a lot of money, right? Fixed rate, the bank gets the first lean position, the banker's happy, you're taking the second, you're taking all the risk, gosh.Jason Monnett:We certainly feel like it's an attractive package, and when you look at the key things when you're dealing with your lender as a small business owner, they're gonna typically offer you a conventional financing option, right?Tony Busch:Sure [crosstalk 00:10:14].Jason Monnett:And hopefully, if you're a small business owner that likes what you hear, you can also ask them to prepare a 504 proposal. Well, that proposal, on the conventional side, from an amortization perspective, what we typically see, that's of course, the period of time that the loan's repayment is based on, is typically a 15- to 20-year package. The term is, it can be, if it's a fixed rate, they're probably only providing a three or five-year term on that note.Tony Busch:Then you go into the arm wrestling session after that three to five years.Jason Monnett:Correct. Rates or fees are negotiated, typically, you'll have a required down payment of 20% or so, and then you obviously have to provide collateral that fully secures the loan. When you look at a 504 option, when we look at the amortization, of course, our loan is a 20-year term. 20-year amortization, fully amortizing for the life of the loan. The bank or credit union needs to provide at least a 10-year maturity in their first mortgage loan, and typically, they'll have a 20-year amortization, which resolves in some nice, comfortable payments. And then the huge benefit, as I mentioned earlier, in using the 504 structure, is that our 20-year fixed rate on our piece is, right now, pricing at well below 5%. And the borrower contribution as noted is as little as 10%.So you can really gain some serious advantages and retain some of your cash flow for growth. And then finally, just touching on collateral, we are not collateral lenders, we are management and cash flow lenders. So we will secure only the project assets, as we call it, for financing real estate, we'll take a second mortgage on the real estate, but we don't look to take peoples' equity or homes to secure the venture, we typically look at the project as its only. So that can be another advantage to leave some of those other assets out of our pool and available for other financing in the future.Pat Lowney:Jason, could you talk for a little bit about how important it is in this period we've gone through with eight years or so with low interest rates and the 20-year fix going forward?Jason Monnett:Right, yeah, so it's a great question, Randy, when are rates really gonna go up? We have seen prime increased three quarters percent over the last year, so was three and a quarter a year ago, or so, and now is up to 4%. So I think as we continue to see slow growth in the economy, we all anticipate rates will rise. So the beauty of the 504 program as it continues to provide that long-term hedge against inflation, that long-term commitment, we always preach, when you finance long-term assets, you should finance it with long-term financing. So just lets you finance your home, typically, and at least a 15, if not a 30 year committed payment. You have the piece of mind on the business side here using 504 to lock interesting hat commitment for 20-years, and lock in that long-term fixed rate.Pat Lowney:Yep, that's a terrific benefit to the borrower.Tony Busch:Huge, absolutely huge, great for cash flow, and they can use the savings to fund growth in their company.Pat Lowney:Right.Tony Busch:Jason, before we get through the first segment, I want to go to a topic on WBD, you're one of 252 CDCs around the country? Where do you stand?Jason Monnett:Yeah, thanks, so, so far here, to date, we use the government fiscal year, but we're ranked eighth in terms of the number of 504 loans we've originated in ninth in dollar amounts. So for the CDC in a relatively ... Wisconsin's about an average sized state when you look at population, GDP growth, and most other measure, but we're certainly above average in our standing in 504 lending, which we're proud of.Tony Busch:We do things right.Jason Monnett:A lot of that's, obviously, all that thanks goes to the small business owners and the cooperating lenders that we work with in the programs.Tony Busch:Banks and credit unions, you really can't do it alone, because you do need that lending institution partner in the process.Jason Monnett:Everything we do involves a lending partner.Tony Busch:Yep. Well this has been a great first segment, we're gonna take a break right now, come back after this break and have another segment, continue to talking with Jason and Matt at WBD, and you're listening to BizTalk on 1150, WHBY, at 1035 FM. Welcome back to BizTalk, we're talking this morning with a couple of gentlemen from WBD, Jason Monnett, senior VP and lender, and Matt Wilcox, the vice president and loan officer, we're talking SBA 504 financing and how a business owner can really get the best benefit from long-term financing. We're gonna come right back to them in a moment, I'd first like to tell you a little bit about our SCORE chapter. Our Fox City SCORE Chapter is located in the Fox City's chamber building. They've been a great landlord for us, we've been in existence for 42 years.We're probably a well-kept secret, but we don't want to be, we have probably 53-55 volunteer mentors in our chapter, and our chapter services in 8 County area from Appleton to Oshkosh to Fond du Lac. Now, we are one of about 352 chapters around the country. SCORE’s a national organization, a volunteer group, non-profit, and we're started by the SBA about 1965, I might not be certain on that date, but SBA was started after the end of World War II, and they realized that so many of the loans they were making were failing, so what can we do to help those veterans be successful in their company?They organized SCORE, which used to be an acronym, service core of retired executives. And it did very well, and I noticed a difference, and it survived and grown to 350 chapters around the country. Today, our tagline news SCORE, for the life of your business, we can help give you life, and sustain life, and keep you breathing and growing all for the purpose of creating jobs in our economy. So if you'd like to learn more about SCORE, you can check us out at FoxCities. and you can go to that website and request a mentoring session with a volunteer. Just articulate your need, we line up your need with a person in our chap who has that expertise.And we offer expertise in the areas of marketing, intellectual properties, some legal issues, accounting, HR product development, work flow, banking, cash flow. If you have an area that you need some help in as an existing business, regardless of your size, or if you're looking to start a company, check us out at FoxCities.. Well Jason and Matt, we were talking in the first segment, about how the program works, and some various connections, and you need a lender and so on. Maybe we could take this next segment and walk through an example of, what is $1,000,000 deal look like, can you walk us through that?Jason Monnett:Absolutely. So let's say, hypothetically, we have a growing manufacturer, and coincidentally, or incidentally, I should say, about 22% of our existing loan portfolio is to manufacturing firms, so that's representative of Wisconsin's strong manufacturing culture, obviously. So we have a manufacture that's been growing. They have operated, historically, out of lease SBAce. And they're looking to either purchase or build, let's say, $1,000,000 facility to help facilitate some addition growth they have within their customer base. Typically, of course, the small business owner would investigate options for purchases, and also, potentially, research contractor bids and locations in industrial parks to build.At some point, you're gonna go in and talk to your lender. And you're gonna outline your request. And the lender, obviously, at that point, as I mentioned, could provide a conventional financing option, as I mentioned earlier.Tony Busch:On that $1,000,000 project.Jason Monnett:On that $1,000,000 project, which may require a 20% down payment, $200,000 or so, and they'd be willing to finance the other 80%. They may do, as I mentioned, a three to five year term commitment on the financing with, say, a 20-year, or 15-20-year amortization, and then the rate would be negotiated. What we always want to encourage borrowers to take a look at is, at that point, looking at a 504 option as an alternative. And in that situation, the lender could, potentially, just call WBD, call Matt, and have a joint meeting to explain the benefits of the program to the borrower.And of course, at that point, Matt would come in and talk about the fact that, instead of having to put 20% down payment into a project, $200,000, it could go down to 10%, so you've just retained another $100,000 in cash to help support your growth. The bank would have to finance what we call, bank or credit union would have to finance in their entirety, what we call the interim loan period, so initially, you just have one lender for that 90% financing. And then we'd work through our process to lock in the fixed rate on our 40% and get the bank paid down. So the important thing to remember, really, is just to think about this as an additional option.And think about the benefits that it would provide you in terms of preserving working capital through the lower down payment and providing that long-term fixed rate. Mechanically, of course, one of the objections we hear to any government loan program, and government program in general, right, is paperwork and fees. But that's really our job as a certified development company that helps deliver the program, we first, I jokingly say, we always harass the banker, because what we need for our underwriting process is really gonna be the same types of information that they're gonna already collect.So tax returns on the business, personal financial statement and tax returns on the owner. And then, of course, the project cost information, the what we'd be looking at. And so, once they've provided that to us, there's a few forms that we go back, directly, to the borrower, to collect and make sure that we have an eligible application package, and we work through our credit approval process, and onward to the SBA application process.So all of that sounds intimidating, but really, what we're looking at in our total time frame from when we get all the information and have a lender on board, subject to RNSBA approval to when we have that final approval, it's typically 3-4 weeks, sometimes can even be less if we hit all of our timing right. All of the 504 loans throughout the whole country, and you mentioned all the other CDCs, Tony, that are active. They're all processed in one building, which is located in Citrus heights, California. I had the pleasure of visiting there in June. It's not real exciting, it's pretty much just a bunch of cubbies.But they've been fantastic, these days, it's not unheard of for them to receive an application throughout secure portal, called E504, and then issue the authorization or approval the same day.Tony Busch:So it's all automated, preparation on the front end really expedites the-Jason Monnett:Correct. We've been able to streamline the number of forms that require signature, we've been able to streamline our approval process, and the submission process to SBA. So don't be spooked by the timing, or the paperwork, that the long-term benefits are well worth it.Tony Busch:We have to take a break, but I want to ask this quick question, if the business owner engages 504 with their lender, does SBA stick their nose in the operation of the business for 20-years?Jason Monnett:No. So you are just dealing with us as your representative or conduit to the SBA. Definitely dealing with us upfront, and then on an ongoing basis, we collect annual tax returns.Tony Busch:From the lender?Jason Monnett:We sometimes can get them directly from the lender with proper authorization, but we do need annual tax returns [crosstalk 00:21:17].Tony Busch:I just wanted to dispel the fear out there that if you're dealing with the bank that now you have the government.Jason Monnett:Yeah, no, it's the same thing the bank requires it on an annual basis as well. Good point, Matt.Tony Busch:We'll have to take a break right now, we'll come back on the other side, and Todd, please hold the line, we'll pick you up on the other side, you're listening to BizTalk on 1150 WHBY at 1035 FM.Automated Voice:[Commercial]Tony Busch:And welcome back to our show this morning, we are talking with Jason Monnett and Matt Wilcox of WBD, we're talking about long-term financing for fixed assets like real estate and equipment. And we're talking as a SBA7(a) loans. Stay tuned, we'll get back to them in a moment. But we're gonna have Pat Lowney tell us a little bit about a couple of seminars [inaudible 00:22:34] SCORE is involved in, at least one seminar in another event, that we often get involved in, in addition to the free and confidential mentoring that I mentioned in the last segment. Pat, what's on that calendar?Pat Lowney:Well, Tony, we've got one that SCORE's putting on called introduction to financial statements, which is gonna be Tuesday, September 12th, from 6 P.M. to 8 P.M. and it's gonna be at the Fox City's chamber building in Appleton. And this is gonna help you understand, better manage your business, engage with your lenders and investors. And working with your accountant, I think it's gonna be a very good one for a lot of different people.Tony Busch:And a lot of folks need to understand what a balance sheet is and how it works with the income statement, and a statement of cash flows.Pat Lowney:Absolutely.Tony Busch:That shows how they're managing their company, so they should know how to read those.Pat Lowney:Yes.Tony Busch:Yep, perfect.Pat Lowney:Always good. And then the second one we are promoting is Launch Wisconsin's Conference, which is gonna be October 17th and 18th at Lamble Field. If you're involved in that, or interested in that, Google Launch Wisconsin, this is a great conference, I think I'm gonna take a trip up there and participate in it, they've got over 200 speakers, workshops, key notes, those kinds of things. It's gonna be two great days.Tony Busch:Yeah, and I think Steve Case is gonna be investing $100,000 in a company, and he only does that in five cities in the country every year. So he caught wind of Launch Wisconsin, I gotta go there. So we're expecting 2,000 people there.Pat Lowney:That's gonna be great.Tony Busch:Should be a lot of fun. So yeah, check it out, what are the dates, again, Pat?Pat Lowney:They're gonna be October 17th and 18th at Lamble Field and Green Bay.Tony Busch:Super. Well thanks, Pat, and if you want to learn more about what's going on at SCORE in terms of seminars and so on, check us out at FoxCities.. We have a pretty active calendar there, and we don't want you to miss anything. Well we have a caller on the line this morning, and it's Mr. Todd Miller, good morning, Todd.Todd Miller:Good morning, Tony, how are you?Tony Busch:Thanks for calling in. You have a question for our guest, Jason and Matt?Todd Miller:Well actually more got a just kind of a pitch for the 504 program and Jason, you're familiar with the project, and I'll keep it very, very brief, but we actually ended up working with a local company that hauled products around, and they decided that they would rather, in addition to hauling, they could decide to, maybe we could start up some products for other companies. And I went in there with the help of a banker, and the first thing we actually ended up doing, and this [inaudible 00:25:07] SCORE seminar, Tony, about financial statements. We have to go in there, in spite of the accountant, and bring in a CPA to, basically, clean up the financials before we could do anything.And it took us a good year to do that. Once we got that done, we brought WBD in and we were able to get an approval on a 20-year fixed rate on a second mortgage. Around 5%. And the borrowers, they're happy about that. And they did have a rough stretch of stuff in '16, but they're off to a flying start in 2017. So the program has been out there for a long time, I worked for it for a long time, and it is a very good program. And I'll just leave it to Matt and Jason if they want to follow up with that.Tony Busch:Well thanks for the call, Todd, those are good comments. Any reaction, guys?Jason Monnett:Yeah, thanks very much, Todd, we appreciate you calling in and sharing that success story.Tony Busch:Sure. Matt, I'm gonna direct this question towards you. When the 504 program is out there, what are the size requirements? What size companies, or loan requests makes sense to do 504?Matt Wilcox:Sure, really anything over $300,000 on a minimum basis, total project, is sort of the sweet spot of the 504. And so the starting point-Tony Busch:After the break even hits?Matt Wilcox:Yep. Correct. And the SBA 504 program can go as high as $5,000,000 total aggregate exposure. So really, what that translates to is a 12 and a half million dollar project as 40% can be in the SBA. So it can be fairly sizable, but don't be afraid if it's a small project. We'll use the $1,000,000 example before, but we have quite a few projects come through that are $300,000-400,000 and a small business can benefit from this, it's not just a large manufacturing company that can benefit.Tony Busch:If a company takes out a $400,000 project today, and three years later, they're growing like a weed, they need another $1,000,000, like Jason said, with the building later on, can they get another 504?Matt Wilcox:Absolutely.Tony Busch:But the aggregate can't be more than the $5,000,000.Matt Wilcox:Than the $5,000,000, correct.Tony Busch:So you could have three or four of them.Matt Wilcox:Yes.Tony Busch:They could have 7(a)s in addition to those 504s.Matt Wilcox:Correct.Jason Monnett:[crosstalk 00:27:25] Guarantee authority between the 7(a) guaranteed portion and the 504 the venture has to be five ‘mil and under. There is an important exception, though, and I kind of touched on it earlier, kind of manufactures. We have a per-project limit. So we can go to $5,500,000 portion on our portion per-project. So we have borrowers in our portfolio that are manufacturers, and we've done multiple multi-million dollar projects. And we may have between 10, 15+ million in total exposure on 504, so those manufacturers.SBA is screaming at us to help manufacturers by using the 504 program.Tony Busch:Manufacturing creates jobs, manufacturers grow, creating more jobs.Jason Monnett:Yep. Absolutely.Tony Busch:That's a great program for manufacturers. So what if I'm a manufacturing, Pat, and I own a very successful manufacturing company. And we have $13,000,000 in existing commercial loans on our real estate. And we have about 17 years left on that 25 year amortization, can I re-finance that into a 504 program?Jason Monnett:You can now.Tony Busch:Really? Wow.Jason Monnett:There was a short period of time between 2010 and 2012 where post-great recession, we were allowed to do standalone re-finance projects.Tony Busch:Sure.Jason Monnett:And WBD proud to say, we were the most active 504 refinance lender in the entire country, we're number one ahead of any other CDC. So fast forward, the return to the re-finance program. We're very pleased to have it back. Under that program, we can not only look at new money requests, but also look at existing real estate, any equipment loans that were originally used to acquire or construct fixed assets. And we can take a look at layering in a new re-finance structure to provide the borrowers long-term fixed rate financing. For existing debt, the way that works is you get a new appraisal, and we can lend up to 90% of that appraised number to take out existing debt. That would mean that the bank would be at 50% LTV, we'd be at 40%.There's also an ability to finance, on a limited basis, some business expenses, or what you may call, cash-out, and have those rolled into the structure of being secured by the existing fixed assets. If we're doing a cash-out project, we're limited to 85% loan devalue. And the cash-out portion can only be 25%. But both situations, again, provide that opportunity for the borrower. Maybe it missed the boat on the 504 the first time, but here's an opportunity to re-rack your existing obligations, use the re-finance program and lock in some funds long-term.Tony Busch:And as you mentioned with rates possibly moving up, they've already gone up about a point, and there's probably more risk of rates going up than benefit of rates going down in this economy, why not consider that?Jason Monnett:Absolutely.Tony Busch:So if a company's listening, someone's listening, do they call Matt, do they call J ... Who do they call? What's the phone number?Matt Wilcox:Sure, well you could certainly call the local office here in Oshkosh, the general number is 920-231-5570, you can ask for me. We also have Jeff Sheffler, he's another one of our loan officers here that works the new north territory. And Jason, as well.Tony Busch:And you have a website with information, too, is that ?Matt Wilcox:You got it.Tony Busch:All right. And people should go to that site, 'cause right at the top of that site are the rates you have right now for the 20 and the 10 year issues. And that's got to peak anyone's curiosity to learn more about this program. Think about it as an option to traditional financing. If you're thinking long-term in the growth of your company, you need this program. And structure your balance-sheet with the right debts.Matt Wilcox:Right, absolutely. We also have a great video about what WBD is, or who WBD is, and what [inaudible 00:31:07] for loan program is. I told Jason multiple times, as a lender for all these years, trying to explain the 504 program to a borrower, I wish I would've had that, I could've just showed them that, and then in three minutes, it gets a very good, comprehensive overview of what the program is.Tony Busch:And really, if the business owner wants to learn more, there's no harm to the business owner by calling Matt, and asking for an hour interview, and learn more about it. And if it's not gonna work, fine, you checked it out.Matt Wilcox:Absolutely.Tony Busch:But you don't want to not check it out, and find out after the loan was done, you could've done it. Matt, another question for you is, what sort of specialty used ... How does that work with a specialty use, or startup companies. How do you handle a startup?Matt Wilcox:As we talked about before, with the SBA 504 program involved, you can get involved with as little as 10% down. There are a couple things that change that, and increase the requirement for down payment. One, is a special use building. Some of the ones that come to mind would be a funeral home, if it has a crematorium.Tony Busch:A dental laboratory?Matt Wilcox:Typically, those aren't, unless there's a lot of special purpose build outs. But hotels, convenience stores, bowling alleys.Jason Monnett:Assisted living, yeah. I know a lot of those-Tony Busch:What is the equity requirement on those?Matt Wilcox:Then it's an additional 5%, so 15% down.Tony Busch:Still?Matt Wilcox:Still.Tony Busch:Compared to what a bank would require in a traditional bank loan?Matt Wilcox:Correct.Tony Busch:Yeah.Matt Wilcox:And also, startups, if it's a startup business that's been around for less than two years, the SBA does require an additional 5% down, so if it's not a special purpose building, but it's a startup, it would be 15%. If it's a special purpose building and a startup, it's gonna be 20% down.Tony Busch:Got it.Matt Wilcox:But still, 20, your fixed rate on that point, 30% of the project is a win for the business owner.Tony Busch:That's huge.Pat Lowney:Do you do anything with agriculture?Matt Wilcox:Yes, we do some dairy, for the most part, there's been some struggles with that in recent times over some environmental requirements. But we're working through that right now, and hopefully, we'll have a solution. So it's something that we have been doing.Pat Lowney:Okay, great.Tony Busch:And other industries that you're doing a lot of hotel work, or manufacturing? What kind of industry ...Matt Wilcox:So historically, what we call, accommodation in food service, so hotels and restaurants have been just south of 20% of our portfolio.Tony Busch:Okay.Matt Wilcox:And of late, we've certainly seen a surge statewide in hotel requests. Mostly purchases and renovations. So we're being a little careful of that, we don't want to become overly concentrated. But right now our portfolio in hotels alone is only about 10% of our overall portfolio, so we're still okay. We've also, as I've mentioned, done a lot of manufacturing loans that comprises about 22% of our portfolio. We do a lot of professional buildings, so you mentioned a dental clinic earlier, that would be an example of that. And those are somewhere in the 15-20% range of our portfolio. We can also do retail. Obviously, the retail sector has some challenges these days. But we've certainly done retail operations overtime.Things like whole sale and cold storage also fit, and then recreational facilities as well. When you think about the way the 504 program works with us being a second mortgage loan providing the lender with a more comfortable loan to value position. I think it's a fair assessment to say that a bank will look to us for that credit enhancement, if you will, when they're looking at a project in a slightly higher risk industry, so that's why you may see our portfolio skewed a little bit more that way than a traditional bank portfolio. But that's part of the reason that the program exists.Tony Busch:And even if there is no risk in the deal, and the borrower has a great balance sheet, they should still consider going 504 for the fixed rate option.Matt Wilcox:Correct.Tony Busch:And there are two other benefits that, Matt, maybe you could talk a little about. That 40% portion of WBD, SBA are holding. If the business owner wants to sell or move, what are some benefits there, too?Matt Wilcox:Yeah, right, it is an assumable loan upon an underwriting process and approval. So if you are a business owner and seven years down the road, for some reason, you want to sell, or you have a reason to have to move on from that opportunity. The person coming in to buy that could potentially assume that sub-market financing. We use the example of right now where our rates are around four, six, so if you had a 20-year fix rate locked in, and at the time, you were going to purchase a building. Bank rates were seven and a half. You can assume a good portion of that debt at sub-market financing and benefit from that long-term lower fixed rate than what you get in a market.Tony Busch:And you can take that second mortgage position to the lender who's going to enjoy a first mortgage, and that's behind the first mortgage of the lender.Matt Wilcox:Correct.Tony Busch:Who loses?Matt Wilcox:Right. Right. We haven't seen a lot of assumptions of late, I'll just note that, 'cause we've a such an extended low rate period time-frame, but going forward, I would expect to see a lot more.Tony Busch:Could be, and with the boomers selling, retiring, wanted to position our company for selling, and making it easier to sell. It's a great opportunity to include that in their planning, but they could also move the balance of the loan to another project, is that how that works?Matt Wilcox:That's what we'd call a collateral substitution could work in some cases. So if they would outgrow their current facility, but want to keep that loan in place and secure it with something else, we can typically work it into the debt structure on the new property. Yep, that's another nice little option for some folks.Tony Busch:Well I'm really eager to call somebody, I want to talk to them. Matt, what was your phone number again?Jason Monnett:Give your direct line.Matt Wilcox:Sure, my direct line is 920-966-1490.Tony Busch:And you can also learn more if you go to , you have a good website, Matt, you mentioned you have the video out there.Matt Wilcox:Yes.Tony Busch:And there's contact information there?Matt Wilcox:Correct.Tony Busch:So really, if anyone's listening, and they have a business and they're looking at financing fixed assets of 300,000 and up. Or if they have existing debt out there, and they're fearful they have to go to the bank next month, arm wrestle for the next three years of interest rate, why not consider looking at WBD and see what that fixed rate option might ... how that might play out for them.Matt Wilcox:Absolutely.Tony Busch:Because re-finances are available now.Matt Wilcox:Mm-hmm (affirmative).Tony Busch:Yeah. One quick question on the 504 loan, a lot of banks who will impose a pre-payment penalty. What is the pre-payment penalty on a 504 loan?Jason Monnett:Yeah, so I'll take that one, Tony, so there is a pre-payment pedal in place for the first half of the loan. And it declines each year. So on a 20-year loan, which is most of what we do, it's in place for the first 10 years. The first year, it's the note time, or the note balance times the coupon rate, which right now, is about 3% before those servicing fees I mentioned earlier. Times 100%, next year, so it's basically 3% of the loan. Next year it's not balance time coupon rate times 90%. Third year times 80% and so forth. After 10 years the pre-payment penalty is gone.Tony Busch:But nobody's gonna want to pre-pay the bond rate loan, they'll pre-pay their bank loan first, 'cause it's usually a higher rate, or more vulnerable rate. But they can do that.Matt Wilcox:Often times, the bank puts in a re-finance penalty on their first mortgage loan, that if it's re-financed by another financial institution, there is a pre-payment penalty, but they don't usually mind if the business owner has excess cash flow and wants to reduce their debt to reduce that banks first mortgage [inaudible 00:38:40].Tony Busch:Sure. Their equity position's improving, their LTD's improving. With that, we're gonna take our last break, we'll come back on the other side, wrap up the program, and I'm really looking forward to the BizTips that Jason and Matt have for us this morning. You're listening at BizTalk at WHBY, 1150, and 1035 FM.Automated Voice:[Commercial]Tony Busch:Welcome back to our final segment this morning, you're listening to BizTalk, and our guests are Jason Monnett and Matt Wilcox of SPD, we'll get back to them in a moment, but we want to pay one last, make one last statement about our SCORE chapter here in Fox Cities. We bring you this program every Saturday morning, we've been doing it for probably 17, 18 years. And we could not do it without our sponsor support. So we really appreciate the sponsor support we've been given all these years. And they rotate in and out, but we want to thank Fox community's credit union, Albertson Hailing CPAs, and we also want to thank Sarah De Bruin at Legal Business Edge LLC. For their support of sponsoring BizTalk for you each weekend.If you're in business, or thinking of going into business and you're not subscribed to it, gosh, for only $20 a year, you can get a lot of good information on what's going on in the business environment, a community here in east central Wisconsin that will help you grow and help you compete better.So check out the business news, and thanks Larry and Jerry for your support. Guys, we're gonna wrap up the program now, but we wanted to talk a little bit about the owner occupied buildings. Some of those may not be, may be eligible, can you give us a rough overview on that?Jason Monnett:Yeah, so you have to have an active small business as well. So things like apartment buildings where you're just collecting rents are not eligible. Flip side of that is, things like assisted livings, where there's assisted living facilities where there's an element of care and service provided are eligible. So if you have any questions about whether you qualify or not, by all means, give us a call and we can quickly comment-Tony Busch:Who do we call?Jason Monnett:Call Matt, call me.Tony Busch:What's your number again?Matt Wilcox:My direct line is 920-966-1490.Jason Monnett:And I'll also mention, I'm available as well, many times in the Oshkosh office and Jeff Sheffler, of course, is extremely well versed on all of the eligibility requirements as well.Tony Busch:And you have a number of loan officers serving the [inaudible 00:43:16], so if Matt's on vacation fishing again-Jason Monnett:We'll get you an answer.Tony Busch:Then we'll get somebody to help you out.Jason Monnett:More likely to be hunting for him.Tony Busch:Yeah. And we also wanted to talk about, again, I want to emphasize this point, if a borrower goes to a bank and gets involved in an SBA7(a) loan, or a 504 loan, they're not inviting the government to come and intervene in that relationship. The lenders, the point.Jason Monnett:Correct.Tony Busch:So it's not like it might've been 40 years ago, or that all kinds of intervention, and answering all these questions, it's not like that.Jason Monnett:And to further that point, too, Tony, SBA's no longer the lender of last resort. That ship has sailed a long time ago, so we have a lot of healthy borrowers that are using the program 'cause they recognize the benefits of the terms that they could offer.Tony Busch:Right. And I also want to, just for the credibility of WBD, we in Wisconsin, should be very proud that you are ranked in the top 10 of 252 in the country. And when you think about all those industrial areas on our country, Ohio, Indiana, Michigan, all the things going on, we're in the top 10.Jason Monnett:Yeah, and don't forget economic engines, like Southern California where there's just so much going on, so we're proud of our standing.Tony Busch:I imagine you guys will be up at the [inaudible 00:44:31] Wisconsin event? You're gonna be up there mixing around with the crowd and then answer questions up there?Jason Monnett:Absolutely.Pat Lowney:So we'd like to ask, guys, as we end the program, each week, what would be your business tip to our listeners?Matt Wilcox:Sure, I'll take that one first. Well I've been saying this to small business owners for many, many years, one of the things that I say you can do best is to develop a very strong team around you. Develop a relationship with a banker, your accountant, organizations like SCORE, and definitely do not be afraid to ask questions. The more questions you can ask, the better off you'll be.Pat Lowney:Great, thanks, Jason?Jason Monnett:Yeah, mine is, since we're talking about financing, just be open to alternative options, we've talked through a lot of the benefits that SBA financing and 504 specifically can provide to you if you're undertaking a large, fixed asset project, you could be looking at a lower down payment than a bank would require, you could be looking at a 20-year fixed rate and you're four and a half percent, which would really help you long-term lock in those payments and preserve your working capital. Provides extended terms in amortization so you have that set it and forget it mentality, any long-term financing. So just be open to the option and don't be afraid to ask your lenders if there's more than one way to get a project done, and we'd be glad to come in and talk to you and your lender about those needs.Pat Lowney:Lot of options.Tony Busch:It is. Well thank you guys for joining us this morning, we're glad to have you on the show, it was very worthwhile, and hope that you get some calls in the next weeks from our listening audience, some of those folks just don't want to call in during the show. Thanks for being with us this morning, and we wish you the very best. We want to tell our audience that our guest next week is Kurt Hailing. Kurt Hailing is an owner and partner in the Albertson Hailing CPA, a sponsor of our BizTalk program. And Kurt does a lot of work with that chapter. So thanks for listening this morning, we wish you a great weekend, we'll talk to you next week, you're listening to BizTalk on 1150 WHBY, at 1035 FM.#End ................
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