SBA 504 loan program helps Las Vegas businesses buy property

Sarah Thornton started her public relations firm, Connected Communications, in 2007 and set a goal to one day buy her own office space. Fifteen years later, she was able to purchase a building in the southwest Las Vegas Valley.

Thornton credits a loan from the U.S. Small Business Administration known as the 504 Loan Program, which helps small businesses purchase real estate and other assets such as equipment.

“I wouldn’t have been able to purchase office space without (the 504 loan),” Thornton, president of Connected Communications, said. “I was able to purchase this building with 10 percent down versus that traditional 20 percent down. I wouldn’t have been able to buy the building if I had to put 20 percent down.”

The SBA 504 loan program dates back to 1958, but business owners like Thornton and experts in the local financial industry say it’s a relatively unknown program that should be utilized more by Southern Nevada businesses, though there are some drawbacks.

Data from the SBA show for the fiscal year 2022 there were 161 small businesses in Nevada that received 504 loans, compared to 175 in fiscal year 2021. Both figures are up from pre-pandemic 2019 when 115 small businesses received the loan. According to the SBA, there are more than 313,000 small businesses in Nevada.

Megan Comfort, senior vice president and small business manager at Nevada State Bank, said the 504 loan is not very well known among small business owners compared to those at financial institutions. And she said the number of 504 loans “ebbs and flows” with the overall economic market — when it’s easier to get financing for property purchases more businesses seek 504 loans.

“Small business owners, they sometimes don’t have the ability to have an in-house CFO, or somebody that’s very versed in lending products,” Comfort said.

The loan offers for-profit small businesses a long-term, fixed rate financing for major fixed assets with a loan amount of up to $5.5 million, according to the SBA. Nevada SBA District Director Saul Ramos said banking or loan experts can help, and becoming pre-qualified is key when it comes to being able to utilize the loan for property ownership.

Settling in

Thornton purchased a 2,000-square-foot office space near the 215 Beltway for $784,000. The company moved into its new digs in October.

She said the new location is a big improvement over the firm’s previous office, which was two smaller offices totaling 220 square feet with a monthly rent of $2,500.

“It’s a nicer space than we were in,” Thornton said. “We’ve definitely had the ability to improve the office space to fit our needs perfectly.”

Thornton worked with Chris Hunter, senior vice president of business development at TMC Financing, to navigate the loan process.

“In a commercial setting (Thornton) probably would have had to put somewhere between 20 and 25 percent down on our property to be able to purchase it at a lending institution doing a conventional loan,” Hunter said. “That’s a pretty hard hit on a lot of small business owners out of their capital needs.”

Neb Kefale, owner of SOS Property Restoration in Las Vegas, just closed on a $2 million, 8,000-square-foot property off West Sunset Road near Harry Reid International Airport that was financed, in part, through a 504 loan. He learned of the program through a commercial banker.

He was able to avoid a large down payment — estimating that he saved $200,000 — on the property, and put those savings toward expanding his business, which has about 25 full-time employees. Kefale, who started his company in 2017, said his last office space was about 2,000 square feet, and his monthly rent was $2,700.

But he cautioned that it can be a lengthy process since it’s more complicated than a conventional loan. It can also be less enticing for sellers. He estimated that he lost bids on five properties due to other bidders having cash offers or conventional financing.

But Jake Carrico, Northern Nevada regional manager for the Nevada Small Business Development Center, said it can help build wealth.

“It’s just another asset,” Carrico said. “So instead of paying rent on a monthly basis, and basically just giving money to a landlord, you’re actually building up equity in a property.”

Contact Sean Hemmersmeier at shemmersmeier@reviewjournal.com or on Twitter @seanhemmers34.