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Small Business Job Act Has Passed (H.R. 5297)

What does this mean for you as a business owner? There are several major changes that we will discuss below. Note all of them are positive.

SBA 7a & 504 Loan Enhancements

First of all, there has been a temporary Guarantee Fee reduction. Both the SBA 504 and SBA 7(a) fees have been eliminated and the guarantee on 7(a)'s has been increased to 90%, from 75%. However, the fee elimination only lasts until 12/31/10, or until $505 million in appropriations to support them is gone. This relative short time frame is our biggest criticism of the bill. Regardless, if you are considering refinancing your existing commercial mortgage or purchasing a new building, get on it immediately. The fee saving are approximately 3% of the loan amount...

Maximum loan amounts has increased substantially. These changes are PERMANENT. The new maximum loan amount on on 504 loans to $5 million (on the second lien piece. Max total loan amount is now $12 million), and small manufacturer loans and energy loans have increased to $5.5 million. Also, the maximum amount of 7(a) loans has increased to $5 million... from $2 million. This is huge.

New net worth and net income maximums. Though most borrowers do not have issues with this, many highly successful entrepreneurs have been eliminated from SBA financing as they make to much money. New PERMANENT changes have increased the maximum tangible net worth to $15 million and a two-year average net income (after Federal income tax) up to $5 million.

New provisions for SBA 504 refinancing. This bill establishes a two-year program of business debt refinancing through the 504 program, independent of the usually required job creation goal. This enables 504 loans to be used for refinancing of qualified existing debt without business expansion. More details below.

Refinancing Details, Small Business Job Act

As mentioned above, there is a 2 year temporary provision for refinancing debt with the SBA 504 program that does not involve an expansion. Below are some qualifying details of this provision.

Debt was incurred more than 2 years ago.
Debt is not subject to a guarantee by a Federal agency (i.e. may not refinance a 7(a) loan).
Debt was used to acquire a 504 eligible fixed asset(s).
Debt is collateralized by a 504 eligible fixed asset(s).
Borrower has been current on all payments for at least a year.
Amount of financing (both the bank and SBA loans) is not more than 90% of the value of the collateral, otherwise additional collateral may be required to cover the deficiency.
Borrower has been in operation for all of the 2-year period ending on the date of the loan.
Financing may include the refinance of qualified debt plus payment of business expenses.
Must include a specific description of the expenses for the the additional financing.
Must include an itemized list of the amount of each expense. May not be used for non-business purposes.

We are very excited by the recent changes as it will help many businesses that have had the door of financing shut of them for over three years now. For example, borrowers that have loan amounts over $2 million with loan to values over 60% are a perfect example. These borrowers have had virtually no finance options as conventional financing has been so difficult to get done.

Have a transaction you're working on? We are interested in taking a look. Fill out our breif, no obligation commercial loan application now.