The SBA Drags its Feet While Small Businesses are Hurting…
SBA 504 Expert, Chris Hurn, has been a staunch supporter of the US Small Business Administration (SBA) for years. He believe that this government agency has done quite a lot of good for small business owners and our economy, and it continues to do good in many respects. Recently, however, he (along with lots of small business owners and lenders nationwide) has become very frustrated with the progress of the SBA 504 Refinance Program. Watch his video below for a full explanation of why you should find it unacceptable how the SBA has administered the 504 Refi Program since it became law (as part of the Small Business Jobs and Credit Act) in September of 2010
Tags: sba, small business administration, commercial real estate loan, small business loan, mercantile capital corporation, 504 loan, commercial property financing, sba 504
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Thanks for the invite,great vid.
I meant conventional (non-SBA) lenders -- none of them are doing a structure like the 504 provides.
I agree MOST government programs are a mess, woefully ineffective & inefficient... but THIS ONE isn't quite that way. It works & works well bringing Wall Street-type financing to Main Street businesses... I just want them to make it work even better (per the law that was already passed & signed). If all gov't programs were like this, we wouldn't be in the mess we're currently in.
@debtsheperd BTW, since you asked & commented, I will tell you that there are absolutely NO lenders making 90% loan-to-cost financing with 25 or 20-year fully amortizing terms at below-market, long-term fixed interest rates. SO, end this relatively effective public-private partnership & that means businesses will have to put more capital down, get shorter terms, get balloon payments, & pay higher rates. THAT will have a negative effect on the economy. Programs like the 504 need our support.
@debtshepherd You may be right about my "wishful thinking" that bureaucracy might work more efficiently than it does... but here's the thing with these user-fee-supported (government-guaranteed) loans: government has relatively minor role in them. Private-sector lenders approve & make them; business owners pay their user-fees to "insure" them; & SBA approves (or denies) them & applies a guaranty. There is no "capital" being provided by the government. These operate at zero subsidy.
Good video Chris. I commend you for your calm optimism. Are we waiting for bureaucracy to become more efficient? Efficiency is not it's nature.
What would America be like if government didn't provide capital for small businesses? What would the housing industry be like if government didn't "insure" home loans?
Government insured loans hinder a natural, free market process from thriving.
About a month later, they finally waived the requirement for a commercial appraisal upon submission (rather than before it funds, like is the norm for a "regular" 504 -- and if the value isn't there, approval amounts are cut back, deals restructured, etc.). There was also the requirement of a form from the bank being refinanced -- tips-off the current bank -- that was finally waived. I could go on, but message me separately if this "inside baseball" is REALLY something you want to know about.
@moonbaby625 BTW, first the Agency (in mid to late February) released regs about this, but restricted it to commerical mortgages maturing between then and December 2012. That produced a trickle of dealflow. Within a month, they raised this first provision, now allowing commercial mortgages that weren't coming due (in other words, that didn't have balloon payments).
@moonbaby625 Not sure what "source links" you need. Just Google "Small Business Jobs and Credit Act of 2010" to look up the provisions in the law. As I'm in the industry, we all hear about the regs from the Agency as they get released. I suppose you could Google them as well. The two primary pieces of the new 504 Refinance Program that has gone "un-issued" by the Agency are: the working capital provision and the up-to-125% LTV provision (with additional pledged collateral).
Great video! Can you provide source links? Ive been complaining about the sba for a few years now and this topic is very concerning to me.