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North Bay Business Journal

Monday, September 28, 2009, 4:55 am

SBA seeing uptick in lending

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    After slow start, higher loan ceiling, fee waivers drawing some  borrowers

    NORTH BAY – The Small Business Administration is finally seeing an uptick in loan applications since the introduction of enhanced programs as part of the recovery act earlier this year.

    In April, $700 million was allotted to the Small Business Administration to go toward five programs to help increase SBA lending, which has opened up SBA eligibility to 70,000 more businesses because it is based on profitability rather than size.

    About $375 million was set aside for temporary fee eliminations on SBA loans as well as an increase of guarantee limits from 75 percent to 90 percent. Also, the America’s Recovery Capital loan program enables banks to make 100 percent guaranteed loans for struggling business owners for up to $35,000.

    Karen Mills, SBA administrator, in an address on Sept. 22, said, “SBA weekly loan volume is up about 60 percent compared to the two months before the recovery act. We’ve supported over $10 billion in lending so far. We’re back near 2008 levels in weekly loan volume.”

    With fee eliminations alone, a business can save more than $50,000 on a $2 million loan.

    Mark Quinn, district director of the U.S. Small Business Administration in San Francisco, said he attributes the increase in activity to the new programs. But he said the funds could soon be exhausted.

    He said both the waiver and the increase in guarantee have been an asset.

    “The fee waiver helps the borrowers, and the guarantee helps the lender,” he said.

    However, he noted that lenders are making sure that while they have only a 10 percent exposure, they are not making less prudent loans.

    Jason Ehn, senior SBA loan officer for Redwood Credit Union, said the elimination of fees has brought borrowers to the table. “It has given them an incentive to grow.”

    He said, though, they don’t know whether any of the programs enhancements will be reinstated.

    More changes are coming to SBA with the new standard operating procedure for loans introduced in early September.

    There will be several impacts, said Michael Rice, senior vice president and business lending manager at Circle Bank in Novato.  The 504 loans, which had previously been capped at $2 million, are able to be as much as $4 million in certain situations. If a business can prove its energy efficiency has been raised 10 percent, the loan size can be doubled to $4 million.

    Also, with a business acquisition, there has been a shift in rules, with more allocated to goodwill.

    In January 2008 there was a cap put to goodwill financing in  acquisitions of $250,000. That was raised to $500,000.

    The weekly number of applications for Small Business Administration loans has increased 60 percent, and lenders and consumers alike are wondering how long the stimulus funds will last.

    In addition to the enhanced SBA program, there is legislation in the works to make better use of the ARC loan program, the part of SBA that is intended to give short-term relief to businesses in dire straits.

    For every $50,000 of an SBA loan, it is estimated that one job is either created or retained. Small businesses employ half of all private-sector employees and have generated more than 64 percent of net new jobs in the past 15 years.

    Because of this and the desire to help small businesses continue to flourish, “we are hopeful that the guarantee increase and the fee elimination will continue,” said Mr. Ehn.

    There is talk about an extension on these programs, but no one is certain how it would pan out.

    “The trade groups believe it will be extended but no one really knows,” said Mr. Rice. “I think they will keep the increase to the guarantee.”

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    Comments

    3 Comments

    1. October 2, 2009, 11:56 am

      by John King

      SBA loans are on the rise and 504 loans are available for much larger projects and loan amounts than $4 million…IF a business goes green.

      The $4 million 504 “piece” is only the SBA-backed second mortgage, but there is no limit on the amount of the first mortgage, so we should start to see more projects in the $12 to $14 million range as the economy recovers and as more and more businesses go green.

      The Green 504 Loan also offers the following benefits:

      1) There is no job creation or job retention requirement as there is with non-green 504 loans. (Although you would have to think that a business healthy enough to be constructing a building would be creating jobs).

      2) The loans can be used for large equipment purchases including solar/photovoltaic arrays AND you can use the 30% Federal Grant as your down payment – effectively creating 100% financing.

      3) The loans can be used for renewable energy production facilities such as biomass or biodiesel.

      You can find more comprehensive information at:

      http://www.greencommercialcapital.com/Renewable-Alternative-Green-Energy.php


    2. October 3, 2009, 7:16 am

      by SBA Seeing Uptick in Lending : Dunkin Donuts Independent Franchise Owners

      [...] V. Loceff, writes in the North Bay Business Journal that the Small Business Administration is finally seeing an uptick in loan applications since the [...]


    3. October 5, 2009, 9:11 am

      by Debra Riegner

      The SBA is definitely helping small business, but one bank cannot provide all the funds desperately needed by small business owners. There are alternatives to bank loans, and small businesses nationwide are taking advantage. One of the beneficial alternatives is a business cash advance because obtaining money is quick, requirements are not stiff, and most importantly, the cash advance loan is paid off through automatic debits from credit card sales. There are no set monthly payments. The SBA’s ARC loan is definitely a loan to consider as well as lines of credit, but both have lengthy processes and strict requirements. To learn more about business cash advances, visit http://www.businesscashadvance.com/blog.


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