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Vinny Muratore Discusses SBA Loans with Bob Coleman
Vinny Muratore Discusses SBA Loans with Bob Coleman



Stone Bank's SBA Division President, Vinny Muratore, was interviewed by Bob Coleman at the Choice Hotel Owner's Conference in Orlando last month. Check out the full interview and gain a little insight into the differences between a 504 loan and a 7(a) loan.


Chris Hurn
Founder & CEO of Fountainhead Commercial Capital
Chris Hurn is the founder and CEO of Fountainhead Commercial Capital, a company that provides commercial real estate financing and growth capital for small business owners.

Vinny Muratore
President of Stone Bank’s SBA Division
Vinny Muratore has over 40 years of commercial and SBA financing experience, having served as Senior VP of Newtek Business Services, Regional Marketing Director and Vice President for the Treasure Coast, South Florida and Tampa/St. Petersburg regions for Florida First Capital.

Bob Coleman: Why would someone want a 504 loan over a 7(a) loan?

Chris Hurn: Well they may have been pushed into it based on size, number one. That's probably the most relevant answer to the question to people in this room. If you have a project that is beyond $5 million, you are not going to be able to get SBA financing unless you do 504. I would say the other reason is right now we are in a rising interest rate environment. It tends to be more advantageous if you can fix you expenses including your commercial mortgage. So that tends to push people to 504's as opposed to 7(a)'s.
Bob Coleman: Describe an average 504 transaction.

Chris Hurn: On a $10 million transaction maybe somebody is buying a Comfort Inn on the west coast that is very well performing. It's in a nice metro area. Purchase price is $10 million. It requires a little bit of price movement. You would put in your 20% down, which is pretty common these days with SBA. You would have 50% first, a $5 million first on that project, probably a 5 or 7 year fixed interest rate with at 25 year amortization on the second which would be SBA guaranteed portion and you would have a below market 20 year fixed rate. Now, that is about to move to a 25 year fixed rate. We are now in an interesting area where the agency is finally moving off of doing 20 year debentures to 25 year debentures for the 504. Probably the first one will occur in April or May. My guess is from that point forward that will be on the 25 year fixed rate.

Vinny Muratore: One of the main differences certainly is the loan size. On a 7(a) our maximum loan size is $5 million. However we just closed a 7(a) on a Quality Inn of $7 million where we did a pari passu first to exceed that $5 million limit. The difference on a 7(a) you could add your franchise cost, which you cannot do on a 504. You can add your working capital which you cannot do on a 504. We are really capped out at the $5 million.

Bob Coleman: Let's talk about structure of a 7(a) loan. Chris is touting the benefit of a fixed rate of 504. What is a typical structure of 7(a) these days?

Vinny Muratore: We can do a 7(a) loan with as little as 10% down, not 20% down. Our typical structure is a 25 year term, it's a floating rate, anywhere from 2 to 2.75 over prime that adjust every quarter for the life of the loan for 25 years. That is the big difference. However with 10% down it is a great program for a loan $5 million or less.

Bob Coleman: Can someone structure a 7(a) loan in a fixed rate environment?

Vinny Muratore: There are very few lenders out there doing fixed rate. We close a lot and sell into the secondary market. The secondary market is not favorable to fixed rate 7(a) loans at this time. That might change if the interest rate environment starts rising.