Small Business Bill to Become Law on Monday!

On Monday, the President will sign into law HR 5297, the small business bill. This bill has huge ramifications on commercial lending AND the economy. Most people don’t realize how big this bill is and the ramifications of it on small business lending. Right now, I want to talk about execution – what are the nuts and bolts of executing loans around this new bill. As such I will hit the key provisions and then what we are doing about it.

The key SBA provisions of HR 5297 are noted below:

For 7A:

· Increase to maximum SBA 7a loan amount to $5,000,000 (permanently)

· 90% guarantee through December 31, 2010

· Fee waiver for the rest of 2010 (subject to available funding)

For 504:

· 504 Debenture increase to $5,000,000 for most applications and $5,500,000 for manufacturers (permanently)

· Two year window for refinancing debt (details provided below)

· Two year extension of the First Mortgage Pool (FMP) program from the date of the first pool issuance – first pool issuance expected to be September, 2010

· Fee waiver for the rest of 2010 (subject to available funding)

504 Refinance Provision:

Here is a summary of the provision:

· Property must be owner occupied (51% or greater)

· Debt must be at least two years old

· Borrower in operation for the entire two year period

· Proceeds of which must have been used for 504 eligible fixed assets for the benefit of a small business concern

· Payments must be current for at least one year prior to application

· Maximum LTV on the existing property is 90%

· With additional collateral, the maximum LTV on the existing property is 125%

· Federally guaranteed debt is not eligible for refinancing (7A, 504, USDA)

· Two year window

It is important to note:

· Not every bank will participate in these changes. Chase has already come out and said they will not.

· In addition, I speak almost daily to local CDCs (SBA) and they are saying that it could be MONTHS BEFORE THE CHANGES IN LOAN AMOUNT AND THE REFINANCING PROVISIONS ACTUALLY KICK IN. The bill is vague in its timelines. Basically, Congress has passed it, now the lenders and the SBA need to execute it and that can take a month or two or three.

SO WHAT AM I DOING ABOUT IT?

I have a tremendous amount of SBA loans in process. The 90% guarantee will help 2 marginal loans get done immediately. The savings on the fees will affect all my clients that will be closing over the next 3 months - so that is good. For new refinances, we have chosen to GO AHEAD AND WRITE THE LOANS UP. We will be taking the applications, packaging them and putting them in order in a que so that the very day the refinancings can get executed, we are there with a plethora of loans. Basically, I am marketing the product now and just informing my clients of the wait. But this bill will help us write a tremendous amount of extra business, not just the refinances but the higher loan amounts. There are plenty of deals I have that can only get approved SBA 7A but they were too big - this bill opens that door. It is huge and hopefully, you take advantage of it.

Call me to get started on your loan. Brett Swearingen 800-557-0682 ext 1