The SBA Loan Market: Financing In Greater Demand Than Ever

Nationally speaking, the finance of owner-occupied commercial real estate seems to never get significantly easier. Our current national economic conditions of recovery have not yet heated up the average enthusiasm of bankers for financing sub-$2M expansions in most real estate sectors, which ensures a more or less permanent lending gap affecting small business that Congress has recognized and addressed with the creation of the Small Business Administration.

Dating back to the Herbert Hoover administration, what eventually became the SBA was established by Congress to help businesses hurt by the Great Depression of 1929-39.  Shepherded along by Franklin Roosevelt, the program evolved during World War II to assist smaller suppliers with loans in competing against huge corporations for manufacture of war materiel.  The SBA we know today was created in 1952 by Congress and signed into law the next year by Dwight Eisenhower, spinning it off from the US Department of Commerce into the standalone agency “under the general direction and supervision of the President”.

7(a) – The SBA’s Keystone Loan Program

SBA’s lending and programs are many, but the biggest and most used is called 7(a) Loan Guaranty, where loans up to $5M are available to business for a wide range of purposes including real estate financing.  Terms can reach as long as 25 years while most loan repayments are shorter than that.

Fixed-rate 504 loans

While SBA offerings under its 7(a) program are fairly well known, less widely known is the 504 Certified Development Company loan program. Offering long-term fixed-rate loans for purchases of real estate or equipment, 504 is lauded for lower costs because the fixed interest rates tend to be below-market.

Intermediaries called Certified Development Companies commonly secure 40% of such loans, with 10% coming from borrowers and the remaining 50% coming from a private lender under SBA guarantee. According to the most recently published SBA Quarterly Lending Bulletin, the aggregated number of small business loans outstanding reached almost $600 billion, reflecting a rise year-over-year of 1.7%.

Both commercial industrial (C&I) and commercial real estate (CRE) loans make up small business loans.1 A careful look at these loans shows that they continue to indicate progress in capital availability for small businesses. For example, C&I continues to maintain a positive uneven growth (Figure 2). In addition, the decline in the small business share of CRE loans has slowed. C&I loan standards changed little in the first quarter of 2015, but bankers reported easing standards and terms on loans secured by nonfarm nonresidential borrowing (Federal Reserve’s Board Senior Loan Officer Opinion Survey). While there was not a significant change in demand for C&I loans, respondents reported that the demand was stronger for all CRE loan size categories.

The reminder is that SBA financing is a heavily-used option for the commercial real estate deals that are in the reach of professionals in secondary and tertiary markets.  As the recovery struggles to spread itself evenly across all the scales of local market in the US, 7(a) and 504 programs are there to make that recovery felt in every corner of the economy.


10. September 2015 by Wayne Grohl
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Commercial Real Estate News Roundup For Sept. 8, 2015

Big mergers, global buyers desire one-stop-shopping, industrial pricing may be at its peak, Wal-Mart shrinking, Apple’s fresh look, booming multi-family market — and more. It’s all here at the Commercial Real Estate National News Roundup for September 8, 2015.











  • High Walk Score Makes MF Stand Out,, September 4, 2015 – Value-added properties that offer high walkability and family fun are very desirable in suburban areas.
  •  The Latest on Rent Growth, Commercial Property Executive, September 1, 2015 – Multi-family rent growth holding strong, but volatile international stock market may trigger a cooling soon.
  • Steady Hiring Favors Multifamily,, August 31, 2015 – Consumer confidence and  a record number of 20 somethings in the market drive multifamily income opportunities.



08. September 2015 by Wayne Grohl
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Study: EB-5 Challenges, Successes

Since 1990, the EB-5 visa program has been a tool for converting international capital flows into local economic development and employment, creating jobs in targeted areas and offering foreign investors visas for doing so. Funds from foreign investors are often channeled into capital for commercial development projects and a cottage industry around the process has arisen in the years since it first came online.  Commercial brokers and developers across the country have participated in projects funded in part by EB-5 investors, and the interest level is on a steady rise.

Since the time when I published a large list of EB-5 Regional Centers, we’ve seen the program in the news, backing interesting and sometimes even exciting projects all over the U.S.

With Finance Sometimes Comes Allegations Of Fraud

Along with this spike in interest and EB-5 participation has come charges of fraud and abuse from the SEC, such as the recent case of two commercial property developments that allegedly weren’t, both in Seattle. Using private placement memos and subscriptions that, according to prosecutors, did not accurately reflect the project to investors,  has landed one developer in hot water.  While non-EB-5 proposals are just as susceptible to fraud as those under the program, other cases abound, and concerns about lack of transparency as to the program’s effectiveness have been raised.

Report Cites Successes, Challenges, Provides Perspective

A recent Report by the Brookings Institution cites EB-5’s increased utilization despite a “dearth of reliable and publicly available data [on] the economic impacts of regional center investments.

An hour spent with the Brookings report will very well serve the reader interested in understanding the broad shape of the EB-5 program.  It’s invaluable for parsing out the network of intermediaries in the program, understanding compliance requirements and learning the history of successful partnerships between regional centers, investors and the communities they serve.

04. September 2015 by Wayne Grohl
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Commercial Real Estate News Roundup For August 31, 2015

Baby boomers and millennials have more in common than we thought, office construction surges in largest commercial market, medical offices in residential centers are very desirable, retail and multifamily rentals are getting harder to find — and more. It’s all here at the Commercial Real Estate National News Roundup for August 31, 2015.


  • A Whole New Set of Demographics,, August 24, 2015 – GlobeSt’s 15th Anniversary triggers contemplation about the current market drivers and how most didn’t see the trends of boomers, immigrants and millennials leading the way in CRE in 2015.


  • 5 Best Office CBDs to Invest In, National Real Estate Investor, August 27, 2015 – Office buildings in central business districts evaluated on cost and rising expected returns across the country.


  • JLL Wins $103M Industrial Portfolio Gig,, August 27, 2015 – Nine-figure deal includes class A, B and C industrial space that is located in submarkets between Tampa and St. Petersburg area.


  • Resuscitating Dead Malls, Commercial Property Executive, August 25, 2015 – Creative use of space requires service providers like banks and law firms to be flexible and adjust to outside of the box options for new uses for large spaces.





31. August 2015 by Wayne Grohl
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Commercial Real Estate News Roundup For August 24, 2015

On a morning of Wall Street and global equity market correction, sell-side signs in commercial RE mount, yet the secondary and tertiary markets that lagged and logged the least recovery look best from an investment standpoint. It’s all here at the Commercial Real Estate News Roundup for August 24, 2015.








24. August 2015 by Wayne Grohl
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Commercial Real Estate News Roundup For August 20, 2015

(Above: Fed Chair Janet Yellen addresses Congress).

Will she or won’t she (raise rates)?, Chinese capital jetting around the globe, Facebook’s $1B like-button storage facility, and hospitality sector optimism put to the test.  It’s all here at the Commercial Real Estate News Roundup for August 20, 2015.









20. August 2015 by Wayne Grohl
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Chicago Panel Diagnoses Causes Of Consolidation In Medical Property


Biznow Conference Image

A distinguished panel of six commercial real estate experts took the stage in Chicago last week to share perspectives on the radically changing property market for health care.

Assembled at Bisnow’s 4th Annual Chicago Healthcare Real Estate event was a collection of operators, brokers, designers and developers of medical space, including Loyola University Health System’s Director of Real Estate Mike Becker, who kicked things off with an answer about what’s driving consolidation in the space.

“Size drives leverage and size drives scale,” said Becker.  “It’s very important to a lot of folks acquiring space [that they get] to that significant size. The reality is that $130 billion has been pulled out of Medicare/Medicaid reimbursements, commercial payers have cut reimbursements significantly, so the larger you are, the more ability you have to negotiate buying power and larger reimbursements.  Also, the play today is access to capital, and health care is still a bricks and mortar business…access to capital is easier and flows more freely if your size is more significant.”

John Wilson, President of healthcare property advisors HSA Primecare, added that consolidation was a confluence of three major trends: “Demographics, regulation and technology.  In demographics, you have baby boomers, an estimate of 10,000 a day turning 65.  So there’s ongoing pressure to the systems.  With regulation, of course front and center is the Affordable Care Act, which is not only bringing the newly insured to the health care industry, it’s also shifting payment method from a fee based method to a value-based method, which is really driven by quality of care outcome.  And then of course, technology – more and more procedures are moving to outpatient settings.”

Watch The Source for more coverage of the Bisnow Chicago Health Care Real Estate event.


17. August 2015 by Wayne Grohl
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Google Reorganizes Into Alphabet: What Does This Mean For Its Real Estate?

A Google sign from their campus in Mountain Vi...

A Google sign from their campus in Mountain View, California. (Photo credit: Wikipedia)

This week’s announcement that Google will restructure itself and become one of a portfolio of companies under an umbrella named Alphabet adds even more mystery to the already guarded real estate plans of the technology giant.  Headquartered in Mountain View, CA, Google owns or leases around 10 million square feet of space in locations across the US including 3.8 million sf. in Mountain View alone. Where is Alphabet’s business headed and what kind of space needs are in the cards?

A look at the SEC Form 8K they’ve filed telling stakeholders about the restructuring contains only a few clues.  Their plan to create a holding company called Alphabet appears to accomplish a milestone separation. The core web and advertising services (which would include YouTube, Search, Maps, Android, and others) would remain within Google while the company’s major recent moves into biotech (Calico), internet service provision (Google Fiber), environmental controls (Nest), cutting-edge research and development (Google[X]) will be brought into Alphabet and under the direct financial guidance of founders Larry Page and Sergey Brin. At the same time, Larry and Sergey will hand the CEO role of Google to Sundar Pichai.

I see in this a classic sorting of business lines where the most capital-intensive and most speculative ventures are being pulled closer to the founding executives, making it so that an investment in Alphabet is a more direct investment in the vision of those executives.

While there’s no way to tell what direction Alphabet will take in space acquisition, I believe the loudest signals would come in the form of successes in its projects for driverless cars and national fiber optic rollout.  Viable automotive designs mean industrial real estate in Alphabet’s future, and probably lots of it.  And the more fiber Google can provide, the greater expansion demand for its own already-large data center construction.


14. August 2015 by Wayne Grohl
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Commercial Real Estate News Roundup For August 10, 2015

More women needed in CRE, Orlando retail and office buildings are in great demand, industrial market strong in Kansas City and more.  It’s all here at the Commercial Real Estate Real Estate Roundup for August 10, 2015.





  • Orlando Retail and Office Spiking,, August 7, 2015 – According to commercial real estate brokerage firm, Marcus & Millichap job growth will be up in Orlando by 3.9 % this for a total of 44,000 more jobs.
  • 5 Secondary Office Markets to Watch, National Real Estate Investor, August 7, 2015 – Real estate services firm, JLL reports office property sales were up 19.6 % this last year with Q2 2015 being the best quarter since the downturn of 2008.
  • 5 Takeaways from Half-Year Office Sales Performance, National Real Estate Investor, August 3, 2015 – First half of 2015 shows 400% gain in sales in two secondary markets,  Raleigh/Durham, N.C. and St. Louis, MO. according to New York’s RCA a data and analytics company.




  • Who’s Opening and Closing Stores?, National Real Estate Investor, August 6, 2015 – Bed, Bath And Beyond looking fluffier as time goes on, while old-line grocery names are drooping.


  • New Trends in MF Rental Patterns,, August 4, 2015 – Handling the disruption to decades-old patters of suburban migration is an apartment market near you.

10. August 2015 by Wayne Grohl
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Commercial Real Estate Roundup For August 3, 2015

Like-kind exchanges get a census, Q2 sales slump, office construction booms in ten markets, an intergovernmental turf war, and what does $12 million get you in Milwaukee? It’s all here at the Commercial Real Estate National News Roundup for August 3, 2015.



  • Sales Growth Slow in Second Quarter – – July 27, 2015 – Is lower volume due to higher CAP rates, concern over potentially rising interest rates or something else?









03. August 2015 by Wayne Grohl
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