The Senate Committee on Small Business and Entrepreneurship also passed two bills that will extend the fee reductions and increased guarantees on SBA loans through 2010. This clears the way for a much improved SBA program for all of next year.

You will recall that in February of 2009 the administration infused money into the SBA programs that effectively eliminated the guarantee fees and increased the guarantee percentage under the 7(a) program to 90%. This has been a huge boost to the program and has really gotten banks interested in becoming active SBA lenders.

We feel that additional monies will be appropriated to continue not only the fee waiver but the increased guarantee percentage well into 2010. Until then, we will continue to process loans under the newly issued guidelines as expeditiously as possible.

For refinance opportunities, borrowers may still want to take advantage of the program even if a fee is involved. The benefits of longer terms, additional money, lower rates (and reduced risk to the bank) usually far outweigh the guarantee fee. The bank would also have the option of paying some or all of the fee, which would be more than offset by the premium earned.

For new business opportunities, SBA loans are still the best alternative for both the borrower and the bank.

What this means to small businesses; there has never been a better time to borrow. What this means to banks is that there has never been a better time to lend money under this program. Banks that may be unable to lend conventionally due to capital and liquidity issues can make 7(a) loans. The secondary market for selling 7(a) loans has become active again and we have seen premiums lately in the 10% range.

There have also been improvements in the SBA 504 program such as fee waivers and expansion of the program to include refinancing in some cases.

Most of these enhancements are temporary so businesses and banks must act quickly to capitalize on current market conditions. At the current pace, the stimulus money is projected to be depleted by December.

What this means to small businesses; there has never been a better time to borrow. What this means to banks is that there has never been a better time to lend money under this program. Banks that may be unable to lend conventionally due to capital and liquidity issues can make 7(a) loans. The secondary market for selling 7(a) loans has become active again and we have seen premiums lately in the 9% range.

There have also been improvements in the SBA 504 program such as fee waivers and expansion of the program to include refinancing in some cases.

Most of these enhancements are temporary so businesses and banks must act quickly to capitalize on current market conditions. At the current pace, the stimulus money is projected to be depleted by December.

What this means to small businesses; there has never been a better time to borrow. What this means to banks is that there has never been a better time to lend money under this program. Banks that may be unable to lend conventionally due to capital and liquidity issues can make 7(a) loans. The secondary market for selling 7(a) loans has become active again and we have seen premiums lately in the 9% range.

There have also been improvements in the SBA 504 program such as fee waivers and expansion of the program to include refinancing in some cases.

Most of these enhancements are temporary so businesses and banks must act quickly to capitalize on current market conditions.

What this means to small businesses; there has never been a better time to borrow. What this means to banks is that there has never been a better time to lend money under this program. Banks that may be unable to lend conventionally due to capital and liquidity issues can make 7(a) loans. The secondary market for selling 7(a) loans has become active again and we have seen premiums lately in the 9% range.

There have also been improvements in the SBA 504 program such as fee waivers and expansion of the program to include refinancing in some cases.

Most of these enhancements are temporary so businesses and banks must act quickly to capitalize on current market conditions.

What this means to small businesses; there has never been a better time to borrow. What this means to banks is that there has never been a better time to lend money under this program. Banks that may be unable to lend conventionally due to capital and liquidity issues can make 7(a) loans. The secondary market for selling 7(a) loans has become active again and we have seen premiums lately in the 7.5% range.

There have also been improvements in the SBA 504 program such as fee waivers and expansion of the program to include refinancing in some cases.

Most of these enhancements are temporary so businesses and banks must act quickly to capitalize on current market conditions.

First, for loans approved on or after February 17, 2009, SBA will temporarily eliminate the upfront guaranty fee, which is customarily paid by the borrower. This will include all loans made under the SBA 7(a) program. If the fee has already been paid, SBA will refund the fee. SBA will eliminate upfront guaranty fees until the aggregate dollar amount of 7(a) loans made under this authority exhausts the funds dedicated to this purpose. SBA estimates that will take place by December 31, 2009. Most in the industry believe that this will have very little impact since fees have not really been a deterrent for most SBA borrowers.

Second, the guarantee percentage has been increased from 75% and 85% to 90%. This means (or hopefully means) that banks will be in a position to take on increased risk since they will have less to lose in the event of a default.

Third, the treasury will pump money into the secondary market by purchasing securities backed by SBA loans from the SBA 7(a) program. This in my opinion stands to have the most effect on freeing up credit markets since a good many SBA lenders sell their loans in the secondary market using it as a source of both liquidity and income.

The impact of these changes remains to be seen and only time will tell. It is still disconcerting that SBA would make changes in their program that actually impede new business (the recent goodwill limitation) while the administration announces, with much fanfare these “improvements” to the program. We must all continue to put pressure on our elected officials to reverse the recent goodwill limitations so that the enhancements brought about by this administration can have their full effect.

Total purchase price $1,000,000 allocated as follows:

Allocation One

Inventory $3,000, FF&E $22,000, Goodwill  $975,000

Allocation Two

Inventory $3,000, FF&E $22,000, Goodwill $250,000, Non Compete Covenant $300,000, Customer Base $275,000, Trade name $75,000, Policies/Procedures $75,000

The key difference between these two scenarios is that the second allocation would presumably allow for a full SBA loan for the required $800K (80% of the purchase price) including $250K allocated to “goodwill” where the first scenario would only allow an SBA loan of $275,000.

Food for thought in the event that these changes do take place March 1.

• Immediately offer a “Super SBA 7(a) loan program” for one year as an economic stimulus to help small business access needed capital.  ICBA’s economic recovery proposals advanced to Congress recommend a streamlined, expedited 7(a) loan program with a 95% guarantee, and lender and borrower fees reduced to half of their current level for small business loans up to $500,000.
• Restore a reasonable SBA budget appropriation of $250 million to $500 million to help offset the steep fees on both 7(a) lenders and borrowers as an incentive to jumpstart SBA lending by new bank participants and to increase the number of SBA loans.
• Boost the SBA budget which has been cut nearly in half in the past six years.
• Reinstate the availability of combination (”piggyback”) financing to help serve small businesses with larger borrowing needs.