Ah, school days. Most of us remember a favorite or not-so-favorite teacher for different reasons: Toughest Grader. Most Supportive. Funniest. Most Boring.

Well, my all-time “Most Boring” professor would drone on about some incredibly boring subject, and just as our heads drooped and our eyes closed, he’d say something like, “That’s spilled milk under the sleeping dog.” Or “Every lemon has a silver lining.” Startled awake, up popped our heads. We soon learned that he filled his lectures with mixed metaphors to make sure we paid attention. It worked.

I thought of that professor the other day when Abel Lender, a loan officer with a CDC client, called with this situation: A large 7(a) lender had asked the CDC’s assistance in putting together a 504 loan with a companion 7(a). Was the mixture possible?

ABEL. That lender does mostly 7(a) loans, so I’m happy they thought of a 504. But as I look at it, I’m sure it’s not eligible.

ME. Well you know CDCs often make 504 loans to borrowers who already have a 7(a). It’s simply good and efficient business to market to existing customers.

ABEL. Yeah, I know. But in this case, the borrower doesn’t have a 7(a) loan yet. It’s requesting a 7(a) and a 504 simultaneously.

ME. Okay, we need to package the 7(a) as one loan and the 504 as another, with one important step: When the 7(a) lender submits the 7(a) for approval, they must advise the processing center that there also is a combination application for a 504 loan. That will ensure that the 7(a) loan is processed and approved before the 504 loan application is processed and approved.

ABEL. Um, remind me again why we have to do that?

ME. Glad to. It’s worth underscoring. And it’s need-to-know information for the 7(a) lender when the next deal comes around:

“When an Applicant applies for any combination of 7(a) and 504 loans, the order in which the loans are approved determines the maximum loan and guaranty amount available. Because the 7(a) loan has a lower maximum guaranteed amount, the 7(a) loan should be processed and approved first.”1

ABEL. Thanks for your time, Richard. I’ll get back to you to let you know how it goes.

ME. Okay, Take your time. I’ll be here ’til the cows come home to roost!

Richard Jeffrey, Senior Associate
CDC/504 Program
richard@jrbrunoassoc.com
www.jrbrunoassoc.com

1  SOP 50 10 7.1 pp. 100; 131; 158; 195; 217; 245