Chesapeake-based 504 Capital celebrates 40 years of providing loans to small businesses

Four decades ago, 504 Capital Corp. was a fledgling organization.

Last year, the Chesapeake-headquartered business hit the $1 billion mark in total project financing and assisted small businesses in creating or retaining 9,399 jobs.

On May 3, 504 Capital Corp. celebrated its 40th anniversary of connecting small businesses to capital and driving economic development through job growth and retention.

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What does it do?

504 Capital is a Hampton Roads-based certified development company that acts on behalf of the U.S. Small Business Administration to provide loans to small-business owners.

The firm partners with top banks to provide loans to growing and expanding small businesses in Virginia, North Carolina, Maryland and the Washington, D.C., metro area.

A small business, as defined by the SBA 504 program, is a for-profit company with less than $5 million in after-tax annual net income and a tangible net worth of less than $15 million, explained Kara E. Cournoyer, 504 Capital operations officer.

Founded in 1983 as Urban Business Development Corp., it later changed its name to Tidewater Business Financing Corp. It was mainly referred to as a “Hampton Roads CDC” (certified development company) until its rebranding in 2018 to 504 Capital Corp.

“The primary driver behind the company’s name change was to let customers and prospects know that 504 loans are our specialty,” Cournoyer said.

In fact, it’s the only loan product it offers.

“We definitely see small businesses as the backbone of the economy, which is exactly why we take so much pride in tracking the number of jobs retained and created in our community,” Cournoyer said.

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The loan program

The SBA 504 loan program provides up to 90% commercial financing at below-market, fixed interest rates and repayment terms up to 25 years.

Loan funds can be used to purchase major fixed assets such as owner-occupied commercial real estate or heavy-duty machinery and equipment.

Small business owners can also refinance existing commercial 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 purchase the building it’s currently leasing or can help the business build a bigger facility to accommodate its growing workforce, Cournoyer said.

“We are proud to support the region’s economic development as job growth/retention is one of the key eligibility requirements of the program,” she said.

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What makes it unique?

Brent Swanson, president of 504 Capital Corp., said a lot of people describe the federal SBA’s 504 loans as the best kept secret around.

The company’s success and long-term goals would not be achievable without the invaluable relationships it’s 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 funding process. Our partners are critical to the success of the program and our organization.”

And, Cournoyer added, the firm does not lend to investors.

“A key feature of our program is that we are only authorized to lend to small-business owners,” Cournoyer said.

In 2022, approvals and fundings were at a record high: Approvals totaled $82 million supporting $239 million in total project costs and fundings totaled $45 million supporting $129 million in total project costs.

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Pandemic heightened awareness

“504 Capital has remained steady through several economic cycles over the decades, but coming out of the COVID crisis with back-to-back record-breaking years makes this milestone even sweeter,” said Swanson, who expressed how proud he is of the team’s accomplishments.

The SBA offered a significant amount of government stimulus during the pandemic, such as Paycheck Protection Program and Economic Injury Disaster Loans, and particularly to COVID at-risk industries including restaurants, child care and hospitality. The pandemic affected many of the same industries served by 504 Capital.

“This brought a heightened awareness to all of the SBA’s loan programs including SBA 504,” Cournoyer said.

Because of that, the entire 504 industry experienced a record 2022, Cournoyer said.

“In addition, the stimulus helped to stabilize many industries,” she said. “From the beginning of the pandemic to date, we have had no defaults.”

The company’s performance in the past five years is also a notable achievement, she said. Since 2018, more than 2,500 jobs have been created or retained and 246 small businesses were funded.

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Looking to the future

It’s been five years since the company expanded its reach outside of Virginia.

And it has experienced a steady growth internally, too, expanding from a five-person team at the start of the pandemic to eight. Seven staffers are based in the Chesapeake office and one works in the Raleigh, North Carolina, location.

“We have created two new positions in the past 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 type of uncertainty weighs on the industry today. Cournoyer said rising rates 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%,” she said. “This provides an opportunity for us to help our bank partners mitigate their risk during a downturn or volatile economic climate.”

Lenders may be able to make a loan that they otherwise wouldn’t on their own by partnering with 504 Capital, Cournoyer said.

Looking ahead, she said the company is an ambitious team that wants to be the most reliable SBA 504 source there is for their partners and borrowers.

“We love watching small businesses succeed,” she said.

Sandra J. Pennecke, 757-652-5836, sandra.pennecke@insidebiz.com