Some info on Pending SBA 504 Refinance program

As you have probably heard, the bill recently signed by the President included a straight refinance provision.  While there is a lot of interest in this newly added component of the 504 loan program, we are waiting on the SBA to issue the regulations, the rules if you will, of how the program will work.  We cannot submit applications to the SBA for a straight refinance until those regulations are published.  We don’t anticipate SBA regulations to be out until sometime in December, perhaps even January.

In the meantime, this is what we know at this point:

1.      The loan (and underlying operating company) will have to have been in existence and operating for at least two years
2.      The loan cannot have been obtained under a Federal guarantee
3.      The loan payments must have been current (no more than 29 days past due) for the past 12 months
4.      The original use of funds must have been or eligible 504 purposes (simply being secured by real estate isn’t enough)
5.      The amount that may be refinanced is limited to 90% of the property’s current appraised value (85% for special use properties)
6.      If there is excess equity, the borrow may be able to pull cash out to be used for businesses purposes (this is still a gray area that the SBA rules will define)
7.      This is NOT a bail out program so the business must have adequate historic cash flow ability

This is simply an overview of the refinance provision at this point.  The October 20 year effective rate would be 4.922%, which includes the higher SBA servicing fee that went into effect October 1st.

Here are some initial tests you can begin using now to determine which loans in your portfolio may be candidates for refinance under the 504 loan program:

1.      Has the loan and business been in existence and operating for the last two years?
2.      Has the loan been current for the last 12 months?
3.      Were the original use of proceeds eligible for the 504 loan program (real estate or equipment)?
4.      Is the historical cash flow sufficient to cover proforma debt obligations at a ratio of 1:1?

If any one of those four items cannot be met, or answered “yes”, the loan will most likely not be eligible.  If all are yes, it may be a candidate for refinance under the 504 loan program, and you may begin to formulate your list of refinance projects.

Please remember that a current appraisal meeting SBA requirements will be required prior to application, and a current environmental report meeting SBA requirements will be required prior to funding.   The DPACC has a number of members who are SBA lenders.  CLICK HERE to reach them

NEWS ALERT: SBA ANNOUNCES WOMEN’S PROCUREMENT PROGRAM

From Women Impacting Public Policy:

The U.S. Small Business Administration today released a proposed rule aimed at expanding federal contracting opportunities for women-owned small businesses (WOSB). The women’s business community has been waiting 11 years for an effective program which will help the government meet its 5% contracting goal with women.

According to a press release from the SBA, the proposed rule identifies 83 industries in which WOSBs are under-represented or substantially under-represented in the federal contract marketplace. Additionally, it removes the requirement, set forth in a prior proposed version, that each federal agency certify that it had engaged in discrimination against women-owned small businesses in order for the program to apply to contracting by that agency.

Click the following linke to read the proposed rules, SBA Press Release, and WIPP’s response statement – http://www.wipp.org/resource/resmgr/Procurement_Committee/SBAWomensProcurement.pdf

We will review the rule and provide you with a detailed analysis.

The public may submit comments to this proposed rule up until close of business on May 3, 2010, to www.regulations.gov, where they will be posted after 4pm EST today, or by mailing them to Dean Koppel, Assistant Director, Office of Policy and Research, Office of Government Contracting, U.S. Small Business Administration, 409 3rd St. SW, Washington, DC 20416. Please reference RIN 3245-AG06 when submitting comments.

Contact Angelin Barrios, WIPP Small Business Policy Analyst, at abarrios@wipp.org with any questions.

Some small business lending news – plus some good news!

Started our meetings today on the De Pere Area Chamber’s new Bridges to Business program with Jayne Black at PAi.    No matter the current challenges with the employment numbers it will not be long before we are once again scrambling for talent with the skill sets to walk into our business and be productive members of our staffs.  If we can shorten the new employee “learning curve,” that makes us all more profitable.   Keep your eyes open for more information on this very exciting new program!  If you want a sneak peak, contact Brian Lueth here at the Chamber or at blueth@deperechamber.org.

Our friends at QuickStart (www.quickstrt.com) sent out this update on small business lending today:

We all have heard “banks are not loaning money,” and “it is impossible to get a business loan right now,” and “now is a bad time to start or expand a business.”  We beg to differ!  Yes, we recognize that this is a challenging time; however, we also feel it brings opportunities for business owners.

Yes, it’s true that credit is tight, especially with the larger national banks.  However, our local community banks and credit unions are still very good sources for small business loans.  The Small Business Administration (SBA) has made changes to encourage lending with its Small/Rural Lending Advantage Programs and its 7(a) Loan Guaranty Programs.  These programs offer no fees and a 90% loan guarantee.

In addition to the Small Rural Lending and 7(a) programs, the SBA announced in June two new loan programs for established businesses.  The ARC Loan Program is a 100% guarantee  loan to help struggling businesses.  ARC loans are deferred-payment loans of up to $35,000 available to established, viable, for-profit small businesses that need short-term help to make their principal and interest payments on existing qualifying debt.  ARC loans are interest-free to the borrower, 100 percent guaranteed by the SBA, and have no SBA fees associated with them.

The other new loan program is the Floor Plan Financing Program aimed at Auto, RV, and other dealerships. Floor plan financing is a line of credit that allows dealers to borrow against their inventory, and then repay that debt as they sell their inventory or borrow against the line of credit again to add new inventory.
Whether you are looking to start a new business, purchase an existing business or are an established business looking to improve your cash flow, now is the time to look into the great loan programs that the SBA has to offer.

Just returned from a ribbon cutting at Trends n Things new Olde School Square location in Ledgeview!  Wine tasting and snacks plus great products!  A number of us were grateful for the opportunity to get some holiday shopping taken care of and, yes, I may have purchased a bottle of wine.  What?!  It’s Friday!  Besides, life is too short for bad wine.

Finally for today, the Wisconsin Department of Revenue just released its November 2009 Wisconsin Economic Outlook. While the news is not yet good, it is beginning to improve – and isn’t that the first step to recovery?  A few tidbits from the report:

The outlook has slightly improved since the June release. The current Wisconsin outlook calls for a peak-to-trough job loss of 143,000 or 5.0% of total employment, compared to the 155,300 (5.4%) job loss expected in June.

Trade, Transportation and Utilities is the largest employment sector in Wisconsin, representing 19% of total employment. The forecast for that sector calls for a 4.0% decline in 2009 and 0.1% in 2010.

While the economy may be in recovery, employment continues to fall, with more than 7 million jobs lost through September. The Wisconsin economy also entered recession at the end of 2007, losing 138,900 jobs between December 2007 and August 2009. Though not yet on a recovery path, the dramatic declines seen in Wisconsin employment the first four months of the year will stop.

The outlook contains a forecast of the Wisconsin and the U.S. Economy, plus a special report with a forecast for each of Wisconsin’s 12 metropolitan statistical areas. To view the November 2009 Outlook, please follow the link below:  http://www.revenue.wi.gov/ra/0911/0911.html