Owner Eddie Wilson Cooks Up a Solid Future with 504 Financing
Eddie Wilson faced two major challenges during the summer of 2012 – recovering from cancer and dealing with a balloon payment on a mortgage note on the north Austin location of his renowned Threadgill’s Restaurant.
Several times in the past, Wilson had modified his original mortgage to have funds available for renovations as well as repairs after a fire damaged the restaurant. Throughout these extensions, Wilson maintained a perfect payment record on the mortgage. However, in June 2012 as he was recovering from surgery, Wilson was confronted with a dilemma when his lender could not renew the note due to the bank’s deteriorated capital caused by the national recession. Forced to find replacement financing, the legendary icon of Austin’s entertainment industry had to scramble to beat an August 31 deadline when the note would mature and he would have a balloon payment he couldn’t satisfy.
A friend who was a banker suggested that Wilson contact Texas Certified Development Company, Inc. (TxCDC) to see what options were available. Wilson met with TxCDC President Suzanna Caballero and Loan Servicing Specialist Corey Gaskill to determine what would be the best solution for Threadgill’s situation.
“The restaurant industry is considered a higher risk industry due to the historical failure rates of such businesses,” Gaskill said. “Despite its 31 years in the market, replacement financing is not a simple loan request. Bankers need to feel their advance rates on such collateral are very conservative.” However, the depressed market values in Austin’s real estate sector at the time were proving to be problematic in finding a replacement loan.
Through Caballero’s and Gaskill’s guidance, Wilson learned that a Small Business Administration (SBA) 504 loan would be the best fit because it addressed the needs of both the banker and the borrower. “Threadgill’s was able to borrow 90% of the current appraisal on the North Lamar store and place it on a 3.92% rate loan for 20 years under the SBA’s Temporary Refinance Loan program that was introduced by Congress as part of the Small Business Job Act of 2010,” Gaskill explained. The financing was split between the banker (50%) and the SBA (40%) with Wilson making up the 10% difference with equity existing in the building.
The loan process started when Wilson submitted his application and ended when the bank made a commitment which took only two weeks. “Thank goodness for Texas Certified Development Company and the SBA,” Wilson said. “Years ago, an SBA loan was the most arduous thing you could possibly pursue. I did this one sitting in a Lazy-Boy.”
Wilson noted that many of his restaurant’s customers who are bankers hold Caballero and Gaskill in high esteem for their knowledge of the banking system and their products, as well as their devotion to customer service. And now Wilson, too, has become a big fan. “I was kind of a recluse recovering from a health issue when this issue with the mortgage came up,” said Wilson. “Thanks to Suzanna and Corey and the rest of the TxCDC staff, I had a very positive result through this whole loan process.”
by Dorian Martin