Today in Lanham, Maryland, President Obama proposed the expansion of two critical Small Business Administration (SBA) lending programs, aimed at allowing small businesses to refinance and increasing limits for working capital.
WASHINGTON – Today in Lanham, Maryland, President Obama proposed the
expansion of two critical Small Business Administration (SBA) lending programs,
aimed at allowing small businesses to refinance and increasing limits for
working capital. These are both legislative proposals designed to help small
businesses through what continues to be a difficult period in credit
markets.
President Obama said, “The true engine of job creation will
always be businesses. What government can do is fuel that engine: by giving
entrepreneurs and companies the support to open their doors, expand, and hire
more workers. Today, we're taking another step towards assisting small business
owners get the capital they need to grow and hire.”
SBA Administrator Karen Mills said, “These proposals will
provide us with two effective tools to help small businesses meet specific
challenges brought on by the recession. First, in the tight credit market of the
last two years, lines of credits have been cut for small firms. Raising the
limit on SBA Express loans to $1 million will mean more small business owners
will have quicker access to this source of capital to help restock inventories
and support larger revenue sales, and literally take that next step to grow
their business and create new jobs. Second, thousands of good, creditworthy
businesses find themselves caught by declining real estate values as a result of
this recession. With many of them now facing mortgages coming due in the next
few years, the ability to refinance into SBA’s 504 loan will give them the
chance to lock in long-term, stable financing, as well as protect jobs by
protecting small businesses from foreclosure.”
Details of the President’s new small business initiatives are
below:
1. Expand SBA’s existing program to temporarily support refinancing
for owner-occupied commercial real estate loans:
The Administration is proposing legislation to temporarily allow for the
refinancing of owner-occupied commercial real estate (CRE) loans under the SBA’s
504 program, which provides guarantees on loans for the development of real
estate and other fixed assets. Currently, 504 loans cannot be used for the
refinancing of maturing debt. This change would respond to the difficulties
many current, solvent borrowers face in refinancing existing commercial real
estate loans.
Businesses with a loan maturing in the next year who are current on all loan
payments will be eligible. Lenders that are refinancing mortgages for existing
customers will make a loan for up to 70 percent of the current property value;
and SBA will help finance the remaining 20 percent. For new lenders taking on a
refinancing project, SBA will take on a greater share of financing, up to 40
percent. SBA’s proposal for a temporary, zero-subsidy CRE refinancing program
would be funded through additional fees for refinancing projects, not through a
Congressional appropriation. This proposal will help refinance up to $18.7
billion each year in commercial real estate that might otherwise be foreclosed
and liquidated.
2. Temporarily increase the cap on SBA Express loans from $350,000 to
$1 million:
The President is proposing to temporarily increase the maximum SBA Express
loan size to $1 million, which would expand the program’s ability to help a
broad range of small businesses through a streamlined approval process. Unlike
traditional 7(a) loans, lenders can use their own paperwork for SBA Express
loans, which can be structured as revolving lines of credit. Currently, these
Express loans are capped at $350,000 and carry a 50 percent guarantee. Fees
would cover virtually all of the added costs of this proposal.
These proposals complement the President’s broader small business agenda - a
key part of his overall jobs plan. The other elements of the small business
agenda include:
Extending small business expensing and bonus depreciation for 2010.
Eliminating capital gains taxes for small businesses in 2010.
A Small Business Jobs and Wages Tax Credit that would cut taxes for more
than 1 million small businesses by paying up to $5,000 for every net new job and
covers payroll taxes on overall wage increases in excess of inflation.
A proposal to transfer, through legislation, $30 billion to a new Small
Business Lending Fund that will support lending by community and smaller banks.
Additional SBA lending proposals, including an extension of the Recovery Act
programs that eliminate fees and raise guarantees on SBA’s two largest loan
programs and permanent increases in the maximum loan sizes for major SBA
programs.
President Obama Outlines Latest in a Series of New Small Business Proposals
February 11, 2010
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