The U.S. Small Business Administration has several programs to support business growth and provide access to capital. Two of the most popular are 7(a) loans and 504 loans. Combined, those programs provided $787.2 million in lending in Wisconsin during fiscal 2022 across 1,345 loans. While the total lending figure was down from more than $1 billion in fiscal 2021, it is still above the pre-pandemic amount of $500 million to $600 million annually.
The 7(a) and 504 programs may both be common SBA programs, but they each have distinct uses and their own eligibility requirements.
7(a) Loan Program
A 7(a) loan can be used for a number of situations, including both long- and short-term working capital, on a revolving basis, to purchase equipment, furniture, fixtures or supplies; to purchase real estate, including land and buildings; to construct or renovate a building; establish or acquire a business; or to refinance existing debt.
The 7(a) program has a loan maximum of $5 million, although express loans are capped at $500,000. Loan maturity maxes out at 25 years for real estate and 10 years for equipment, working capital or an inventory loan. Interest rates can be variable or fixed and are negotiated with the lender, although the SBA caps them based on loan size and duration.
For Wisconsin loans in fiscal 2022, the average term was a little more than 12 years and the average interest rate was 5.78%. The average rate climbed from 5.15% in the first quarter to 6.63% in the fourth. For the first quarter of fiscal 2023, which covers October to December, the average was 8.04%.
Wisconsin 7(a) loan volume in the first quarter was similar to the same time in fiscal 2022 (228 loans versus 231 loans), however, total lending was down almost 12.5% from $139.4 million to $122 million.
504 Loan Program
While the 7(a) program loan can be used for a variety of uses, a 504 program loan is somewhat more limited to the purchase of existing buildings or land, new facilities, improvement of land, streets, utilities, parking lots, landscaping and existing facilities, and long-term machinery and equipment.
The 504 program loan cannot be used for working capital or inventory, consolidating, repaying or refinancing debt or speculation or investment in real estate.
The maximum loan in the 504 program is $5.5 million. The eligibility requirements also require a business to have a tangible net worth of less than $15 million and net income of less than $5 million after federal taxes for the two years before the application.
The 504 loan itself comes from a certified development company or CDC. Racine County Business Development Corp. and Madison-based WBD Inc. are the two in southern Wisconsin. Of 134 program loans in southeastern Wisconsin in fiscal 2022, WBD did 109 and Racine County Business Development did 19. The 504 loan would typically cover 40% of a project while another loan from a third-party lender covers 50% and the business puts in about 10% of the project cost as a down payment.
Wisconsin lending activity in the 504 program slowed in the first quarter of fiscal 2023 with 45 loans in the period, down from 110 at the start of fiscal 2022. Total lending on the SBA portion of those loans dropped from $86.9 million to $44.9 million and the third-party portion declined from $121.8 million to $63.4 million.
SBA lending in southeastern Wisconsin for fiscal 2022: These are the top lenders to Wisconsin-based borrowers for projects in Kenosha, Milwaukee, Ozaukee, Racine, Sheboygan, Walworth, Washington and Waukesha counties. Banks are listed based on their rank for project lending and number of loans amongst all lenders supporting projects in the region.
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7(a) Program
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|
Lender
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Loan Total
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Number of Loans
|
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Waukesha State Bank
|
$22,331,200
|
28
|
|
Byline Bank
|
$24,783,000
|
17
|
|
Community State Bank
|
$8,641,900
|
25
|
|
Summit Credit Union
|
$7,788,800
|
17
|
|
Old National Bank
|
$12,007,300
|
11
|
|
The Huntington National Bank
|
$5,886,900
|
16
|
|
Bank Five Nine
|
$5,337,400
|
12
|
|
Live Oak Banking Co.
|
$11,166,500
|
7
|
|
U.S. Bank
|
$3,228,900
|
35
|
|
Oostburg State Bank
|
$3,753,100
|
9
|
|
Associated Bank
|
$2,898,300
|
9
|
|
BMO Harris Bank
|
$4,292,800
|
4
|
|
Readycap Lending
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$4,108,200
|
4
|
|
CenTrust Bank
|
$6,170,000
|
3
|
|
National Exchange Bank and Trust
|
$3,443,700
|
4
|
|
Wisconsin Women's Business Initiative Corp.
|
$1,695,000
|
12
|
|
Bank First
|
$2,669,700
|
5
|
|
Cleveland State Bank
|
$2,919,200
|
4
|
|
Citizens Bank
|
$1,559,300
|
9
|
|
Newtek Small Business Finance
|
$2,316,500
|
5
|
|
504 Program
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|
Third Party Lender
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Third Party Loan Total
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SBA 504 Loan Total
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Number of Loans
|
|
Old National Bank
|
$10,741,625
|
$9,011,000
|
11
|
|
BMO Harris Bank
|
$13,069,806
|
$10,011,000
|
9
|
|
Summit Credit Union
|
$7,969,500
|
$7,103,000
|
10
|
|
Bank Five Nine
|
$8,250,300
|
$6,537,000
|
9
|
|
Waukesha State Bank
|
$7,851,100
|
$7,089,000
|
8
|
|
National Exchange Bank and Trust
|
$8,231,200
|
$6,705,000
|
8
|
|
Citizens Bank
|
$6,243,530
|
$5,031,000
|
6
|
|
Westbury Bank
|
$3,658,200
|
$3,016,000
|
4
|
|
Johnson Financial Group
|
$3,828,648
|
$3,153,000
|
3
|
|
Tri City National Bank
|
$3,421,750
|
$2,782,000
|
4
|
|
Town Bank
|
$2,431,950
|
$1,968,000
|
7
|
|
Bank First
|
$2,476,500
|
$2,024,000
|
4
|
|
Wisconsin Bank & Trust
|
$3,588,875
|
$2,614,000
|
3
|
|
CIBM Bank
|
$3,933,000
|
$2,871,000
|
2
|
|
North Shore Bank
|
$2,667,500
|
$2,060,000
|
3
|
|
Americana Community Bank
|
$5,545,000
|
$3,419,000
|
1
|
|
Byline Bank
|
$2,153,000
|
$1,451,000
|
3
|
|
Pyramax Bank
|
$2,266,661
|
$1,867,000
|
2
|
|
Spring Bank
|
$2,199,000
|
$1,812,000
|
2
|
|
Bank Of Wisconsin Dells
|
$3,465,500
|
$2,903,000
|
1
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