August 1, 2013

Maine loan climate looking brighter

Banks and borrowers are gaining confidence as economic conditions improve, observers say.

By J. Craig Anderson
Staff Writer

(Continued from page 1)

click image to enlarge

James Santamore and Bernard McBean, chefs at Jimmy the Greek’s, prepare lunches at the Maine Mall restaurant. Owner Jim Albert, who started with his first Jimmy the Greek’s in Old Orchard Beach in 2008, used a 504 loan to open this South Portland location in 2011.

Carl D. Walsh/Staff Photographer

click image to enlarge

A diner gets salad in the self-service bar outside Jimmy the Greek's kitchen recently.

Carl D. Walsh/Staff Photographer

Additional Photos Below

Albert said he was surprised at how much easier it was to get his recent 504 loan, given that the approval process still involved a federal agency.

"Usually, the government gets a bad rap," he said. "My bank's happy, I'm happy, and we've got business going."

Participation in the 504 loan program is recovering especially fast because it is a good deal for banks and borrowers, said Turner, the SBA official in Portland.

Normally, when a small business wants a loan to buy real estate or expensive equipment, the borrower must contribute 20 to 25 percent of the purchase price.

With a 504 loan, the borrower can contribute as little as 10 percent and the bank must contribute only 50 percent because a third party is involved in the underwriting process known as a certified development company.

Certified development companies are nonprofit organizations that underwrite the remaining 40 percent of the loans, assisted by SBA guarantees that their money will be covered by the federal government if any loans go into default.

Jim Maxwell is the 504 manager for Maine at Granite State Development Corp., by far the most active certified development company in the state. He said 504 loans offer other advantages to borrowers, such as a fixed interest rate on the SBA-guaranteed portion of the loan.

Most 504 loans are fully amortized, he said, which means they are paid off completely with regular payments throughout their term, usually 20 years. Conventional business loans often include large balloon payments at the end of the term, which can be as short as five years.

Once a 504 loan is approved, the certified development company sells bonds to investors to cover the federally guaranteed portion, Maxwell said. The investors are guaranteed to be repaid with interest over the term of the loan.

Maxwell said he has seen an increase of 25 to 50 percent in requests for 504 loans over the past two years.

He said Granite State Development, which is responsible for collecting on the SBA-guaranteed portion of 504 loans, is selective about applications.

"If you're making bad loans, you're going to spend all of your time servicing those loans," he said.

The 504 loan program is good for private lenders because they lose money through default only if the property or equipment purchased cannot be sold for at least 50 percent of its original value, said Paul Collins, vice president of Lewiston-based Androscoggin Savings Bank.

"We are at 50 percent loan to value, which is a great place to be," he said.

While small-business lending activity still lags the volume seen before the economic downturn, the SBA's Turner said that period was characterized by aggressive lending practices and too little due diligence.

"We probably shouldn't be going back to some of the things that were happening prior to the recession," he said.

J. Craig Anderson can be contacted at 791-6390 or at:


Were you interviewed for this story? If so, please fill out our accuracy form

Send question/comment to the editors

Additional Photos

click image to enlarge

A meal sits ready to be served in Jimmy the Greek's kitchen recently. The restaurant's owner used what's known as a 504 loan from the U.S. Small Business Administration to open its second location, at The Maine Mall, in 2011.

Carl D. Walsh/Staff Photographer


Further Discussion

Here at we value our readers and are committed to growing our community by encouraging you to add to the discussion. To ensure conscientious dialogue we have implemented a strict no-bullying policy. To participate, you must follow our Terms of Use.

Questions about the article? Add them below and we’ll try to answer them or do a follow-up post as soon as we can. Technical problems? Email them to us with an exact description of the problem. Make sure to include:
  • Type of computer or mobile device your are using
  • Exact operating system and browser you are viewing the site on (TIP: You can easily determine your operating system here.)