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The Use of Non-Bank Lenders

by John Reichard on Tuesday, January 05, 2016 4:00 PM

Happy New Year everyone!  I’m starting out 2016 with an unconventional method of financing an SBA 504 deal – using a non-bank lender for the 50% portion of the project.  While traditionally the Third Party Lender, or participating lender alongside the SBA 504 loan, is a community, regional, or national bank, using a non-bank lender does have its advantages.


In a competitive marketplace for deals, bringing in a non-bank lender to finance the 50% portion can provide your client with a loan at more favorable terms than you may be able to provide.  In addition, for existing loans that are up for renewal on the interest rate or balloon period, using a non-bank lender might prevent them from going with another lender and taking their relationship with you to that new lender.

Competitive Terms

Some non-bank lenders are offering terms of up to 25 years, with an interest rate fixed for the life of the loan.  Matching that with a 20-year fixed rate SBA 504 loan makes for a very strong and stable financing package for the borrower.

Keep the Client Relationship

Non-bank lenders are only interested in the loan, not the client relationship.  In fact, non-bank lenders do not hold their loans.  They sell them on the 504 secondary market.  This means that you can still maintain a deposit relationship as well as offer your other bank products to the borrower.

Eliminate Legal Lending Limits

Using a non-bank lender can assist you in situations where you are up against your legal lending limit to your borrower, but you still wish to maintain a relationship with them.

Multi-Purpose and Single Purpose Properties

With the use of the secondary market, non-bank lenders can finance multi-purpose properties as well as special-use properties such as restaurants, hotels, gas stations, auto dealerships, self-storage units, or health care facilities.  Using a non-bank lender might allow you to assist a borrower when you are not comfortable with the special-use nature of the property, yet still gain a relationship with them.

For more information or to discuss how a non-bank lender might fit for an SBA 504-eligible project in Pennsylvania, email us at finance@seda-cog.org or give one of our loan officers a call at 570-524-4491.

Non-Bank Lenders
John Reichard

Information related to the SBA 504 loan program for small businesses.