Leading one of Los Angeles’ most prolific SBA lenders, downtown-based Business Finance Capital, is loan expert and Chief Executive Jacky Dilfer.
BFC, which has specialized in long-term, fixed-rate 504 loans since its 1990 founding, has funded more than 1,000 commercial real estate transactions topping $5 billion since Dilfer took the helm in 2012.
Small- and medium-sized businesses are a primary focus at the non-profit, which operates as an SBA certified development company aimed at promoting economic growth in L.A. and its surrounding areas.
The Business Journal sat down with Dilfer to take a pulse on the local SBA lending sector and get a sense for how national trends compare to BFC’s on-the-ground reality.
How would you describe the current state of SBA lending in L.A.? Where are you seeing the most resilience or pullback in deal flow?
There is consistently a huge demand for SBA lending in L.A. in almost any economic environment. When banks pull back, the SBA assists the banks in being able to be more aggressive in their lending by providing the 40% second trustee and also adding a government guarantee on top of that. The SBA program has remained one of the most attractive and stable financing options on the market, so although there’s uncertainty now due to the war and other economic issues, SBA lenders are still seeing steady volume.
In a market where there’s difficulty accessing capital, SBA has always been a big booster to the business community, because we still have below-market fixed rates, we can still underwrite aggressively, because the risk is split between a bank and a company like BFC, and the borrower still only has to put 10% down.
The SBA reported a record $45 billion in 7(a) and 504 lending across 85,000-plus loans in fiscal year 2025, the strongest year in its history. The annual SBA report from President Donald Trump’s administration lauded efficiency and high loan distribution. How is that record loan volume reflected in the L.A. market? Are there certain loan types that have really driven that volume?
The Trump administration is a large supporter of SBA lending, and the administration understands that this is one of the greatest programs we have in our country, so they’ve shown and addressed their support of it. They’ve enhanced the loan product for manufacturers that are based in the U.S., and manufacturers who apply for SBA loans now will enjoy fee savings. They will receive a concession on the rate. The rate will be about 20 to 25 basis points below what non-manufacturers will get. There’s been a big, big push to support manufacturing.
Are you seeing that your pipeline of loans is more heavily dominated by the manufacturing industry or supply chain-related businesses now, with these changes?
Yes and no. This has been a consistency in our portfolio, because we’re located in L.A. and we have one of the largest, most active ports in the world, therefore we sort of naturally focus more on supply chain-related businesses. We have a lot of wholesalers, a lot of transportation and distribution companies as well as manufacturers.
Of that $45 billion that was lent last year, $37 billion came from 7(a) loans and $7.8 billion from 504. How do you make sense of that disparity in loan volume? Is the 504 channel typically smaller, or is there a greater emphasis on these smaller, capped 7(a) loans recently?
When you’re looking at the numbers, it’s a little bit misleading because 7(a) loans not only finance real estate, but they also finance working capital, business acquisitions and other expenses for businesses. There are lenders out there that primarily focus on this. The small loans are generally $350,000 or below. There has been a big push from the administration to increase this type of lending, so because of that, the number of loans may be a lot larger than for 504 since 504 is 99.99% commercial real estate, with 0.01% being used for heavy machinery and equipment.
How do you interpret the Trump administration’s push for more 7(a) loans?
I believe the administration wants to support the entrepreneurial spirit of this country, because this is what America is based on, and there really is a severe access to capital gap for the smaller mom-and-pop shops, as well as startup businesses, because frankly, the larger banks don’t focus on them as much as they do middle-market to large corporate companies. The SBA was put in place truly to support the very small businesses who actually consist of most of the businesses in America.
BFC has primarily focused on 504 lending in the past. Do you also work on 7(a) loans?
We also do 7(a). We’ve been licensed for about a year and a half now, and we are working on ramping up the program in this area. It’s very rewarding as a lender to see these small businesses thrive and become successful. A lot of them do well, and they become large companies, really large companies. We’ve had businesses start in their garage that ended up selling for eight, nine figures 20 years later in Los Angeles.
Do 7(a) loans carry a different risk profile for you as a lender, and are there other kinds of considerations that are added as you start to administer and lend more in that direction?
There’s a very different risk profile in 504 versus 7(a) loans. (The) 504 (loan) is typically reserved for a more experienced business, sophisticated borrowers that have been in business quite some time and have been renting for a while and simply want to own a building. The quality of assets in Los Angeles is high. There’s not a lot of supply, there’s always a great demand, and values over the long-term increase, so it’s not as high of a risk profile. In fact, the default rate historically has been well under 1%.
With 7(a) loans, the default rate is a bit higher, and it’s just a risk that lenders need to be willing to take to try and help grow their local economies and communities and assist small business-owners. But we do try to be very diligent in our underwriting. We underwrite the transaction just as we would any other loan, and we as the lender make sure that we’re collateralized as best as possible. We take a lien on the business assets. We typically take a lien on the home of the borrower. Lenders have their own formulas they use to try and do everything they can to mitigate a loss.
Who are the borrowers that aren’t getting served right now, and what gaps are you seeing in access to SBA capital in Los Angeles?
In general for the program, especially in Los Angeles, we are so rich when it comes to SBA lenders, there’s a lot of us. I would say most of us are very good lenders and very dedicated to the program and our local community. If you’re a small business and you need to get a loan, you are going to get serviced.
In terms of policy, though: A few months ago, the administration rescinded the ability for us to give loans to green card-holders, and this is something that’s been unprecedented in the program. In a market like Los Angeles or California – where we have such a wonderful immigrant population, and immigrants with green cards that are trying to be on the fast track to become American citizens, and they’re trying to live the American dream – it’s a very unfortunate change, and it’s a change that I know many lenders hope is temporary.
The immigrant community really represents a very large percentage of many lender portfolios, and it will be a huge loss, not only to lenders, but also to these legal permanent residents that are trying to live the American dream. They’re a very good and solid borrowing community, and they work very hard, and they really exemplify everything that this country and L.A. represent, and we hope to see a change in this policy in the near future.
Since the citizenship rule change took effect, what share of your active pipeline has been impacted – deals that had to be restructured or that couldn’t go through?
I would say, using a rough estimate, about 10%. They typically have to apply for conventional financing, which, in many cases, the terms are not as attractive. They need to put more money down, and it could be more difficult for them to gain the financing, but we’ve had to pivot and help this borrowing community figure it out, and we have other sources for them to obtain financing.
