CREDC Blog: Providing Options to your Customer

Small businesses owners are more knowledgeable when it comes to financing for their business and are more aggressive in seeking out the best deal. The Harrisburg market is a very competitive marketplace for deals and there’s probably at least one other lender out there who is willing to undercut you on the rate.

So how can you compete in the battle of interest rates? By providing your customer with options. Showing the PIDA or SBA 504 program as a potential option with your conventional package can go a long way in getting the deal.

Here are some of the benefits to the lender in providing options to your borrowers:

Provide “goodwill” to your customer. By providing a PIDA or SBA 504 as part of your loan package, you are showing your customer that you want to get them the best financing available.

Save your customer money. How would your customer feel to know that they might have an option to save on the amount of cash that would be needed? Even if they have what would be required through conventional financing, would it be better for them to keep some of that available for working capital or to fund future growth?  Or what if coming up with 20% cash would be difficult or impossible, but you still like the deal?  Going beyond the restrictions of conventional financing might make a good deal better from your end as well as the borrower’s.

We have had past deals where the borrower was anticipating putting 20% cash down but by bringing PIDA into the mix, we were able to use the higher appraised value to do 50-50% bank/PIDA financing. The borrower was able to immediately expand their business into a new market – something that they didn’t anticipate doing for a few years

Reduce risk. With a loan through CREDC, the lender’s risk is reduced to 50% of the financing while remaining in first lien position. This is especially important for those customers that you’d like to work with, but who might fall short of normal underwriting criteria or who are involved in specialized industries.

Get an acceptable return on your loan. Rather than having to price your loan as low as possible to get the deal, including a loan through CREDC as part of the financing and the beneficial rate that comes with it, you might be able to price your 50% portion at a more standard level.  When the customer looks at the blended rate between the two loans and the fixed-rate nature of the CREDC loan for the entire term, they may be willing to accept a higher rate from you.

Utilize a certified resource. As a Certified Economic Development Organization (CEDO) for the Commonwealth’s PIDA loan programs and the approved lender for Cumberland, Dauphin and Perry Counties, CREDC is proud to continue its legacy of being a certified lending organization by DCED for over 22 years.

By partnering with CREDC, you create value for your customers and a stronger borrow for yourself. This allows your costumers to save money using lower-than-market interest rates on part of their financing, while you retain liquidity and cushion by putting less cash in each deal. Plus, borrowers are guaranteed stability in fixed interest rates up to 25 years and you are provided with less exposure and better loan-to-value ratios.

Learn more about PIDA and SBA 504 programs on our website at https://www.harrisburgregionalchamber.org/economic-business-development/business-financing/.