Lenders hope for another extension of loan incentives

[caption id="attachment_22760" align="alignright" width="130" caption="Sheila Cargill"][/caption]

[caption id="attachment_22758" align="alignright" width="123" caption="Mark Quinn"][/caption]

[caption id="attachment_22759" align="alignright" width="124" caption="Michael Rice"][/caption]

[caption id="attachment_22757" align="alignright" width="128" caption="Sherill Stockton"][/caption]

NORTH BAY -- The Small Business Administration loan incentives rolled out last year have once again run out, leaving lenders and borrowers in a state of uncertainty.

As part of 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 a 2 percent fee from the SBA on to the borrower.

The funds for these programs ran out on Nov. 23, and an additional $125 million was provided in 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 too has run out.

Experts had hoped the jobs bill now stalled in Congress would contain an extension to the end of the fiscal year at least.

“The funds for the stimulus enhancements ran out in late May, and SBA lending has plummeted,” said Sherrill Stockton, senior vice president and SBA manager at Exchange Bank. “We SBA lenders have all been holding our breath in hopes Congress could get past the partisan bickering and pass the extension.”

She said the SBA has “stacks of loans” that are approved, but the lenders and borrowers have asked to wait in hopes the extension is passed.

If a loan gets approved now and an extension comes, then there is no going back to get the higher guarantee or a fee waiver.

The National Association of Government Guaranteed Lenders in a release sent to lenders last week said that while the $505 million for the extension of the SBA waivers did not come through in HR 4213, there is another bill before the Senate.

Commonly known as the small business jobs bill, HR 5297 includes a $30 billion lending fund and several small business tax items.

This would include larger loan sizes, $5 million for 7(a) and $5.5 million for 504.

Sheila Cargill of Safe-Bidco said not knowing whether the program will be extended has been a mixed bag for prospective borrowers.

She said they have some customers waiting in the queue hoping the fee waiver will be reinstated and some who have chosen to pay the fee.

She said it has been really difficult for some people.

“We had one customer that fell out of escrow and lost the possibility for a new home for the business,” she said.

She attended the guaranteed lenders conference in May and was a lot more optimistic about further extensions at that point.

“Everybody was optimistic,” she said.

She said it is the not knowing that is difficult. “The fees are a large deal, but if it is not going to be extended, we want to know,” she said.

Mark Quinn, district director of the SBA in San Francisco, said as the program runs out of money and then gets more, as it has since it first was launched, the number of loans go up and down.

“When it looks like the money will run out, people make applications. When it is there, they don’t feel like it is as much of a rush,” he said.

He said they are waiting to see if the Senate can approve funding

“We're hoping the incentives are re-funded. In the meantime, the regular fees and guarantees apply. It has been the case that our lending volume spikes and drops as incentives get funded and exhausted.”

Michael Rice, senior vice president of small business lending at Circle Bank, said he certainly has seen an uptick in applications under the SBA incentives, and while the waivers have been great, the SBA program is still the best financing for a small business.

He said he has a few clients that are waiting a couple of weeks because they still think there is a chance it will pass, but it is hard to say when it will happen.

“Even with the fees, it is still the primary source for small businesses,” he said. “There is capital out there, and lenders are lending.”

“Even without the waivers,” he said, “SBA is the best game in town.”