Page 5 - BPAA Quater1 Newsletter

BPAA Go ve rnm e nt A ffairs
Quarter 1 Newsletter

SBA Loan Programs: Are Bowling Centers Treated Fairly?

If you own a bowling center or have ever use forwhichitwasbuilt.” businesses identified as special purpose

taken steps to finance your business, properties in the 2016 SOP 50 10 5(I). Re-
you’ve likely heard of the Small Business According to the SBA’s most recent applying bowling alleys to the list raises
Administration’s (SBA) Loan Programs. Standard Operating Procedure (SOP) 50 10 many eyebrows, along with another
One of the loans offered by SBA is the 504 5(J) effective on January 1, 2018, the significant change made for special
Loan Program, also known as the Certified agency considers a “bowling alley” a purpose properties in the most recent
Development Company Loan Program. special purpose property. In some cases, SOP: if the borroweror any affiliates has an
This program is designed to provide that classification is appropriate but in outstanding balance on a debenture for a
financing to businesses to purchase fixed others it is not. As you may know, over the special purpose property, any subsequent
assets at below market rates, such as land, last few decades, the industry has been projects for limited or special purpose
buildings, new facilities or long-term shifting from a competitive league propertieswillrequire a20% injectionfrom
machinery and equipment. The most basic environment to an entertainment the borrower, instead of 15%. This inflates
and popular loan program under SBA is orientation. Large bar areas, laser tag the burdenforbowlingproprietors.
the 7(a) Loan Program. 7(a) loan proceeds arenas, mini-golf courses, arcade rooms,
can be used for short-term or long-term go-kart tracks, climbing walls, and even SBA’s SOP also includes unique business
working capital and to purchasean existing ropes courses are just some of the appraisal requirements for change of
business, refinance existing business debt, additional venues bowling centers have ownership transactions involving special
orpurchase furniture,fixturesandsupplies. come to adopt. These additions make purpose properties. If an applicant
These programs offer small businesses bowling alleys unique to the 26 other business for a 7(a) loan operates from a
another avenue for financing while doing special purpose venues on the SBA’s list in special purpose property, the going
as the federal government ought to do in the SOP, which include businesses such as concern appraisal must be completed by a
promoting business growth and job gas stations, cemeteries, landfills, mines Certified General Real Property Appraiser
creation in communities. Even Hamdi and wineries. Another distinction is that a with experience appraising the specific
Ulukaya, the Turkish billionaire bowling alley can be housed virtually business/property type. Such appraisals
businessman known for his famous yogurt anywhere. In Washington, D.C., Lucky must allocate separate values to the
company Chobani, made his start with a Strike bowling center is located in the individual components of the transaction
504 loan. However, under these loans, middle of a mall; even the White House including land, building, equipment and
financing a bowling center is treated has a bowling alley. For 504 loans for intangible assets. Finally, according to the
differently thanfinancingastandardyogurt instance, this 5-10% difference in down SOP, “the Certified General Appraiser must
payment may seem small to the SBA, but have completed no less than four going
shop.
for bowling proprietors, it could cause concern appraisals of equivalent special

A project under the 504 Loan Program has unnecessary financial burdens in qualifying use property as the property being

three sources of permanent financing: at fortheloan. appraised, within the last 36 months, as

least 10% from the borrower, 50% from identified in the qualifications portion of
third-party loans (lender), and 30-40% Aside from the SBA’s definition,the agency the AppraisalReport.”
from the Certified Development Company provides no criteria a property has to meet
or SBA. Importantly, the SBA classifies to be considered a special purpose BPAA intends to further investigate these
some properties as a "special purpose property. In October 2017, the SBA issues with SBA’s loan programs and find
property,"whichrequiresat least a15-20% released an earlier version of SOP 50 10 5 strategic ways to soften the blow on our
down payment from the borrower on 504 (J) that excluded bowling alleys from a nation’s bowling centers. After all, if you
loans instead of 10%. The SBA defines a shortened list of six special purpose can put a bowling center in a mall like any
special purpose property as a “limited properties. However, on December 18, other store, it’s worth asking if the SBA is
market property with a unique physical 2017, the SBA issued an updated version treatingthe bowlingbusinessfairly.
design, special construction materials, or a of that SOP that puts bowling alleys back
layout that restricts its utility to the specific on the list along with the 19 other

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