Tag Archives: banking

SBA Help Expiring, Proposals Evaporating…

The SBA had been waiving fees to borrowers and increasing guarantee %’s to lenders.   But the money has run out.    Politicians on both sides of the aisle have proposed extending these benefits at least through 2010, and a number of other potentially beneficial changes were proposed in late 2009 and early 2010.    (Additional proposed changes have included increasing the loan limits for the largest SBA programs – 7a and 504 loans – and allowing the expanded use of 504 loans for commercial real estate refinancing.)

But the money has run out.   The changes from the 2009 economic stimulus bill and the extensions that took them through February have expired.     And the jobs bill that did have extensions and enhancements included within it hit a brick wall late last week when Senate Majority Leader Harry Reid stripped out SBA provisions.      (That bill just hours ago saw strong bipartisan support with a “test-vote” of 62-30. )     The bill pared down costs $15 billion.    Extending the 90% guarantee and fee waivers through 2010 costs only $375 million, so money is not the issue.    Putting the SBA funds back in wouldn’t even be noticed.

Unfortunately, the issue appears to be solely political, as the SBA initiatives appeared to have bipartisan support in the Senate.     Some suggest politicians are holding back, waiting to use the SBA funding as a carrot in a later initiative.     Regardless of the reason, it is extremely unfortunate that government money actually making a difference to small businesses is being held back.    You can’t trace the billions to banks to renewed lending activity, but you can see a dramatic increase in SBA lending interest by banks with the increased government guarantees.

And the waiver of fees, did that make a difference?     Ask John C., who is the owner of a Manhattan restaurant we are now refinancing with an SBA 7a loan.     He was approved a week before the deadline, and therefore he will not have a government guaranty fee on his $1.6 million loan.   If he was approved now for that loan, he would face a fee to the government of roughly $42,000.


Concern Aired Over Banks’ Real Estate Loans

A New York Times article from Feb 11th has an interesting title and the typical mainstream media focus on the glass being half full… buried in the story is the ray of light investors have been looking for:

Mr. Fine said he thought that more than 90 percent of an estimated 8,000 community banks “are strong, stable and growing.”

This means the media’s focus on the negative ignores the fact that the great majority of our lenders are not in trouble. While many high profile loans are underwater the vast majority of commercial real estate loans were prudently underwritten and still provide substantial debt coverage.

New lenders are entering the market every day. Current underwriting standards change on a daily basis, but it is safe to say that strong Sponsors with A properties in A locations that do not require massive leverage will be pleased by the rates and terms available in the market.