The 504 Loan Program is run by the Small Business Administration (SBA) and helps small businesses finance the purchase of fixed assets such as real estate or machinery at low rates, by splitting the loan between three parties: the small business, a conventional lender such as a bank, and a “Certified Development Company” (CDC), a nonprofit corporation established specifically to use 504 loans to promote economic development in a community.
If that sounds complicated, you may understand why the SBA requires attorneys who facilitate these transactions to be certified as Designated Attorney for loan closings. The SBA sister program, the 7(a) Loan Program, is similarly complicated and though it requires no specific certification, attorneys who are interested in expanding their practice into this area should also look into specific training. Given that the current downturn is wreaking havoc on small businesses, it’s an excellent time for attorneys who work with these businesses to familiarize themselves with the loans and assistance available to their clients.
Enter Jan Garlitz. Jan has been handling small business loan closings for over thirty years, and her level of knowledge about these loans is unmatched (she has been referred to as the “Walking Encyclopedia of 504”). Recently, Jan joined Lawline to record the latest installment of her 504 Loan Closings training, and afterwards, she chatted with us about the history of the 504 loans, why she loves representing lenders, and her 3-pound Pomeranian, Truffles.
How did you know you wanted to be a lawyer?
I was always supposed to be the lawyer in the family (according to my parents because I argued with them so much). In the fall of my sophomore year at Cornell, I went to the Career Placement Office and they gave me both the male and female tests (yes, they were still sex-segregated in 1973) for career choices. On the female tests, my best career choices were YWCA Staff Director or High School Principal. On the male tests, I was more than 2 standard deviations to the right on the bell curve for law. I didn’t actually decide to follow that path until I took a year off after college when I ended up working for a small law firm in Washington, D.C. I really enjoyed the work and it solidified my experience.
When did you start handling 504/7(a) loan closings?
In 1987, I started representing some local banks for commercial loan closings, and that included some 7(a) Loans. Until then I had primarily been a litigator and, while I enjoyed appellate work, I didn't like discovery or trials. I am a bit of a "control freak" and litigation cannot be controlled. Representing lenders closing loans gives lots of room for control. In 1991, I started representing the northern Virginia Certified Development Company with 503 and 504 Loans. In 1995, the then Executive Director of the CDC, who was the Tech Issues Vice President for the 504 industry trade association, asked me to participate in a panel developing expedited closings for 504 Loans. Until that point in time, all closing documents (including all the title work) were submitted to SBA District Counsel who had to review everything. The panel met for two days and created the Expedited Closing. Given this huge change in the closing process, it was decided to do nationwide training for CDCs and CDC Closing Counsel. I volunteered to assist an SBA District Counsel to put together the first 504 Loan Closing Course. That counsel promptly went on a two week cruise with his wife and I ended up preparing the entire course - and I've been teaching 504 Loan Closing ever since.
As a result of having nationwide closing procedures, I also worked with the SBA to create the National Authorization Boilerplate, updated regulations (03/01/96) and SOPs (SOP 50-10(4), SOP 50-10(5), SOP 50 57, SOP 50 51 2, etc.) and Forms. To this day, I also occasionally consult with SBA (and SBA personnel still participate in my trainings).
What advice would you give an attorney looking to begin practicing in this field?
Attorneys who do these kinds of loan closings need to be especially detail-oriented. Of course most areas of the law require attention to detail, but closing complicated loans over and over required a certain type of personality. And make sure you enjoy what you're doing! I love being able to look at all the small businesses that I've assisted directly, or through CDCs and 7(a) Lenders.
Tell us something fun about yourself.
My friends often refer to me as the Dessert Queen because if I'm not sampling desserts, I’m making them, including creating my concoctions. I read five to eight books a week, and I love mysteries. I have trained and shown horses and I'm currently training and showing my 3-pound Pomeranian, Truffles.
If you are an attorney interested in expanding your practice to include 504 or 7(a) loans, check out Jan’s programs, which come with up-to-date training materials, including annotated statutes, hundreds of forms, practical advice and updates to the course materials throughout the year. You can become a Designated Attorney for 504 Loan Closings, or learn the basics of 7(a) loans, right from your couch (and let’s face it - you’re probably not going anywhere right now anyway).