Small Business Administration Financing Helps Business Remain in Santa Ana
Eberhard Equipment: From Long-Term Lessee to Property Owner
SANTA ANA, CALIFORNIA Eberhard Equipment has been at their 2-acre lot on Warner Avenue and Harbor Boulevard since 1977 and they have been doing business in Santa Ana since 1945.The heavy equipment facility sells, repairs, overhauls, and rents landscaping and construction equipment. They also supply parts and have service trucks that will go to the job site to repair equipment or bring it back to the state-of-the-art repair shop located in their Santa Ana 10,000 square foot facility. Additionally, the business is an Elite Dealership for Kubota which makes earth moving equipment as well as a dealership for Jacobson maker of wide cut path mowers for parks, schools and golf courses. They even sell and service the latest electric powered equipment such as the Jacobson Eclipse 360 mower and Kubota LXe-261 electric tractor. The business has nearly two dozen employees, including many who have been with the company for decades and who are also employee-owners.
But businesses like Eberhard Equipment have an uncertain future in Orange County. Since 1945 a lot has change especially land values as the county has transitioned its agrarian roots. Like most business, they leased their property; and rents are generally based on the value of the property which have gone up significantly since 1977. There are a lot of alternative uses for such a large lot on one of the city’s busiest intersections; and the city is confronting a shortage of affordable housing. “We leased this property for a long time and when the owner was finally ready to sell, we knew it was a great opportunity,” says Steve Eberhard, a majority owner of Eberhard Equipment. But buying the property would require favorable loan terms which and a large down payment.
Their landlord also faced a challenge. Selling this type of property with a tenant in place would be difficult. Any buyer would have to buy out the current tenant’s lease-hold and have to go through an extensive planning process to get a new development permitted. In California the land could sit empty for years as a different land use could be subject to the California Environmental Quality Act (CEQA), altering zoning with the city, and obtaining a conditional use permit (CUP). So, selling the property to the current tenant would be a win-win. But to make the deal work, Eberhard Equipment needed a feasible way to finance the deal.
TMC Financing found a way to utilize the SBA’s 504 loan program to help Steve Eberhard and co-majority partner, Rosendo Alejandre, secure the funding they needed at great terms. An SBA 504 loan allowed them to buy the property with only 10 percent down on the 8.6 million dollar purchase. Most private conventional lenders require the buyer to come up with at least 20 percent down, but the down payment requirement could have been higher than 30 percent. Their real estate broker, Greg Diab of Lee & Associates, told them about TMC Financing and they worked with TMC’s Business Development Officer Jennifer Davis. Steve explained, “When we looked at all our financing options, the SBA 504 program had clear advantages, so we were ready to move forward with that if we found the right property. And, fortunately, the previous owner decided to sell at exactly the right time for us.”
SBA 504 loans are made in conjunction with a commercial bank and TMC Financing funding the SBA portion of the loan. Eberhard Equipment’s long-time commercial bank, Partners Bank of California, partnered on the SBA 504. Here’s what that might look like for a deal such as Eberhard Equipment’s:
• Borrower down payment: $860,000 (10%)
• Conventional loan (bank portion): $4.3 million (50%)
• SBA 504 loan portion (TMC Financing): $3.44 million (40%)
The SBA 504 financing made the payment affordable with a fixed rate 25-year amortization loan which is similar to a second mortgage on the business’s property. Steve says that the loan experience went well adding, “There are bumps in the road with any deal of this size and complexity, but we had support from the bank and, especially, with TMC Financing. Jennifer [Davis of TMC Financing] was great, always available, responsive, and knowledgeable. Even now when questions come up, she’s right there to help with whatever we need.”
He explains that even with the beneficial purchase price they were able to negotiate, there were other hurdles are including a Prop 13 property value reassessment that resulting in an increase in property tax which made great loan terms important. He says, “Although our current payment is higher than our lease payment alone was, now we have stability, we’re building equity and because of the SBA 504 program’s 25-year amortization and fixed-rate terms, we can plan for the long run.”
“As business owners, we have to consider all options when purchasing commercial property,” Steve says. “My advice is to get in touch with TMC Financing and explore the SBA 504 Loan Program. Their knowledge and experience make all the difference both in terms of the process and for your overall experience.”
TMC has grown to service California, Arizona, Nevada, and Oregon. Conciliations are free and they work with most commercial banks.
About TMC Financing
Founded in 1981, TMC Financing is the leading provider of SBA 504 commercial real estate loans in the nation, funding projects worth over $12 billion across Arizona, California, Nevada, and Oregon. Over 6,000 businesses have benefited from this financing, resulting in the creation
of an estimated 60,000 jobs. Learn more. You can contact TMC Financing at 888 898-8855 THMfinancing.com .
Lindsey Paley contributed to the article.
