Deseret Certified Development Co. has assisted more than 500 small businesses in Utah to obtain more than $115 million in Small Business Administration-guaranteed 504 loans, which also has resulted in more than $140 million in loans from local banks.

Certified development companies make SBA 504 loans according to a formula involving long-term fixed financing that is guaranteed by SBA, a first lien loan from a bank or other private commercial lender and at least 10 percent in capital from the borrower.Scott Davis, president of the National Association of Development Companies (the trade group for SBA-certified development companies) and president of DCDC in Salt Lake City, said the loan-to-cost ratio of up to 90 percent and low, fixed interest rates make 504 loans attractive for small business owners who want to expand but need to conserve cash for expenses.

The SBA-guaranteed portion of the 504 loan, up to 40 percent of the total amount, is funded through the sale of debentures in the private market. As of February, more than $2 billion in 504 debentures had been sold nationally. The February debentures were sold at an interest rate of 7 percent, which made the rate to borrowers for a 20-year loan less than 8 percent.

Davis said the bank's first lien loan can be sold to investors through a secondary market developed by NADCO and Zions First National Bank in Utah, enabling banks to make even more loans to businesses in the community.

In addition to the loan program exceeding $2 billion nationally, the program also has leveraged more than $2.5 billion in first mortgage loans from commercial banks.

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"Because of the participation of the New York bond market, businesses with net worth of less than $6 million get interest rates and terms that banks don't tend to offer to small firms," Davis said.

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