The Small Business Jobs & Credit Bill cleared the House of Representatives last week and was signed into law Monday by President Obama. The bill has many benefits for small business and particularly to the SBA 504 program. These enhancements will provide greater access to credit for small business owners to finance commercial real estate. As a reminder, the SBA 504 program provides up to 90% financing at 20 year below market fixed rate, (4.67% for September, 2010), for small business owners to purchase commercial real estate for business use.
Below is a short recap of the enhancements and benefits for your small business clients:
•Fee Reductions – The bill extends the authority for the SBA fee reductions through December 31st , 2010. Benefit – reduces cost of borrowing to borrower and should serve as an incentive for potential buyers to act quickly to take advantage of this stimulus that will end by the end of this year.
• Maximum Loan Amounts – The maximum size of the SBA 504 loan is permanently increased from $1.5 million to $5 million. This is the SBA portion only. Benefit – this will allow up to 90% financing for purchase transactions up to $12 million, allowing the SBA program to be used by more buyers on larger deals. Another benefit is that it will allow businesses that had previously used the SBA program and maxed out their availability, to once again access the program for additional purchase or expansion.
• Increased Business Size Standard – The SBA has increased the definition of what is considered a “small business”. The old standard was business net worth of $8.5 million or less and average business net income less than $3 million. The new standard is net worth less than $15 million and average net income of $5 million or less. Benefit – This will allow the SBA 504 program to be utilized by larger companies. This increase will allow the program to become a very viable option for middle market companies
• Debt Refinancing – Established a 2 year window for the SBA 504 program to be utilized by creditworthy borrowers for refinance of eligible business debt. Benefit – Allows existing small business property owners to have access to 20 year below market fixed rates offered by the SBA program. With declining real estate values, the 90% financing program provides a solution for a customer with a maturing conventional loan which has a LTV that exceeds bank guidelines (75-80%). Affordable access to credit is a key element for buyers of commercial real estate. The enhancements outlined above are some of the most significant improvements made to the SBA 504 program in the past decade and are considered my many industry experts to be “game changers” for buyers and real estate professionals. Small Business Jobs & Credit Bill cleared the House of Representatives last week and was signed into law Monday by President Obama. The bill has many benefits for small business and particularly to the SBA 504 program. These enhancements will provide greater access to credit for small business owners to finance commercial real estate. As a reminder, the SBA 504 program provides up to 90% financing at 20 year below market fixed rate, (4.67% for September, 2010), for small business owners to purchase commercial real estate for business use. Below is a short recap of the enhancements and benefits for your small business clients:
• Fee Reductions – The bill extends the authority for the SBA fee reductions through December 31st , 2010. Benefit – reduces cost of borrowing to borrower and should serve as an incentive for potential buyers to act quickly to take advantage of this stimulus that will end by the end of this year. • Maximum Loan Amounts – The maximum size of the SBA 504 loan is permanently increased from $1.5 million to $5 million. This is the SBA portion only. Benefit – this will allow up to 90% financing for purchase transactions up to $12 million, allowing the SBA program to be used by more buyers on larger deals. Another benefit is that it will allow businesses that had previously used the SBA program and maxed out their availability, to once again access the program for additional purchase or expansion.
• Increased Business Size Standard – The SBA has increased the definition of what is considered a “small business”. The old standard was business net worth of $8.5 million or less and average business net income less than $3 million. The new standard is net worth less than $15 million and average net income of $5 million or less. Benefit – This will allow the SBA 504 program to be utilized by larger companies. This increase will allow the program to become a very viable option for middle market companies
• Debt Refinancing – Established a 2 year window for the SBA 504 program to be utilized by creditworthy borrowers for refinance of eligible business debt. Benefit – Allows existing small business property owners to have access to 20 year below market fixed rates offered by the SBA program. With declining real estate values, the 90% financing program provides a solution for a customer with a maturing conventional loan which has a LTV that exceeds bank guidelines (75-80%). Affordable access to credit is a key element for buyers of commercial real estate. The enhancements outlined above are some of the most significant improvements made to the SBA 504 program in the past decade and are considered my many industry experts to be “game changers” for buyers and real estate professionals.
Summary overview compliments of my fellow CCIM collegue;
Dean Murphy, CCIM
Fairway Commercial Lending
Director of Commercial Lending
Carmel, IN 46032
