$30 billion in fund, $12 billion in tax incentives extended
NORTH BAY – The passage of HR 5297, the Small Business Jobs Act, established in the Treasury the Small Business Lending Fund of $30 billion and $12 billion in tax incentives intended to spur lending and get small businesses back on their feet.
In addition to the $30 billion in capital, which can be leveraged to $300 billion in loans, there is a continuation of the enhancements to SBA lending, such as fee waivers and increased guarantees.
“I think with the combination of SBA provisions and the $30 billion, it should be a good injection to small business owners,” said Kim Kaselionis, president and chief executive officer of Circle Bank.
Tom Duryea, president and CEO of Summit State Bank, said any additional programs, like the SBA 7(a) loan program, can only help make the local economy stronger.
He said his sense of this SBA lending is that it is making it easier for banks to lend.
“You have increased the maximum loan size, which is big. It is encouraging because a lot of banks cannot take any more risk. It encourages banks to do more loans,” he said.
The extension of the SBA program originally came through the federal stimulus. The SBA received $730 million early last year, which included $375 million to increase the SBA guarantee on 7(a) loans to 90 percent and to waive borrower fees on most 7(a) and 504 loans. Banks traditionally pass on a 2 percent fee from the SBA to the borrower.
The funds for these programs ran out on Nov. 23, 2009, and an additional $125 million was provided last December.
The increase of the guarantee to 90 percent allowed lenders to offer loans to businesses that wouldn’t qualify for traditional financing.
The additional $125 million ran out late February. Then another $60 million went into an extension in March, and it ran out.
That is when the jobs bill funding came into play. For small businesses, this was one of the boons needed to free up money for loans.
The Mortgage Capital Development Corp., a certified development company based out of San Francisco that provides SBA 504 real estate loans in California and Nevada, had a 68 percent increase in SBA financing for the fiscal year ended Sept. 30, 2010, providing $184.83 million in SBA loans for 220 small businesses.
One of the changes to SBA lending out of the jobs bill is the ability for larger businesses get SBA loans.
“Additionally, SBA can finance commercial real estate purchases in excess of $20 million. For the first time ever, middle-market companies have access to the lower rates and attractive terms of SBA financing to grow their businesses,” said Barbara Morrison, founder and president of TMC .
One of the main objectives of the SBA loan program is to promote economic growth through creation of jobs.
“Small businesses are well positioned to create more jobs to lead us out of the recession,” said Ms. Morrison. “We expect that with new regulations and more financing opportunities, this trend will continue.”
The SBA-enhanced loan provisions, $14 billion in lending support out of the jobs bill, provides the following, according to the SBA:
The law extends SBA loan provisions with the 90 percent guarantee and reduced fees through Dec. 31. The $505 million subsidy for Jobs Act loans will support about $14 billion in overall small business lending. In the first week of the Jobs Act, SBA provided nearly 2,000 loans totaling nearly $1 billion in lending support.
There are higher loan limits that significantly increase maximum loan sizes in top loan programs.
The law permanently increased 7(a) and 504 limits from $2 million to $5 million, and up to $5.5 million for manufacturers in the 504 loan program.
The law permanently increased microloan limits from $35,000 to $50,000, to help entrepreneurs with start-up costs and small business owners in underserved communities.
The law expanded the number of small businesses eligible for SBA loans by increasing the alternate size standard to those with less than $15 million in net worth and $5 million in average net income.
There are also temporary enhancements:
The law increased the maximum amount of SBA Express loans from $350,000 to $1 million. This expires Sept. 27, 2011.
In coming months, the law will allow some small businesses to refinance their owner-occupied commercial real estate mortgages into the 504 loan program. This expires Sept. 27, 2012.
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