New SBA Bill - HR 5297 - BIG, Good Changes

by John King on July 15, 2010

HR 5297 - SBA Refinances, Larger Loans, Larger Companies Eligible

SBA lenders have been talking about this for a while now and the latest bill - H.R.5297 (the “Jobs and Lending Bill”) - has been passed by the House and the Senate will now take it under consideration.

This is the bill that stands to have the most immediate and long term impact on owners of small and mid-sized businesses because it is a potential “game changer.”

If passed the impact will be dramatic since it will:

  • allow an SBA refinance with the 504, which would allow those with balloons coming due to refinance their commercial loan.
  • increase the maximum 504 loan amounts considerably
  • increase the maximum SBA size limits for an eligible business to allow larger businesses to qualify
  • re-up the guaranty to 90% for SBA 7a loans. The 90% guaranty for the 7a has been the major reason SBA loan volume has increased because it has given lenders more security.

More Details:

  • HR 5297 would increase “regular” and “public policy” SBA 504 loans to $5 million.  (Keep in mind the 504 loan is a second mortgage and typically accounts for 30 to 40% of the total amount financed so we are talking about some potentially large loans here).
  • Energy efficient or Green 504 loans will increase to $5.5 million as will 504 loans for “small manufacturers.”
  • SBA Size Standards for eligible businesses will be permanently increased to a (tangible) net worth of $15 million from $8.5MM and a 2-year average (net) income of $5 million - currently $3MM.
  • SBA 7a Loans would also be increased to $5 million and the bill would also temporarily bring back the 90% SBA guaranty.

The Big Caveat: It’s a little complicated

These changes have the potential to dramatically impact the commercial lending landscape, but the one potential fly in the ointment is that “Small Business Administration loans” are really traditional (mostly BANK)  loans that are guaranteed by the SBA and the banks still have to step up and lend…and 504 loans underwritten with the new rules (assuming they pass) won’t take off like they should until the banks start getting comfortable approving first mortgages and it may be a while before that happens…because the secondary market for first lien 504 loans is still in it’s infancy after being “re-born,” but that’s a whole ‘nother post.

THE GOOD NEWS…is that IF they pass HR 5297 with the higher loan limit for 7a loans and WITH the 90% guaranty then many more businesses will have options because 7a loans are more flexible than 504 loans and they are very profitable for banks and the 90% guaranty gives banks the level of comfort they need to lend in spite of the current tight credit market…

Like I said…complicated, but the glass in definitely half full.

{ 8 trackbacks }

SBA Loan Fee Waiver
July 15, 2010 at 7:10 pm
Franchise Brokers Association BLOG » Small Business Lending Fund Act in Consideration by Senate
July 20, 2010 at 4:39 pm
Small Business Lending Bill Not Passed...Yet
July 30, 2010 at 9:38 am
SBA Fee Waiver Extension, Small Business Jobs Bill, Small Business Lending Bill
August 2, 2010 at 9:17 am
Small Business Lending Fund Passes First Test
September 16, 2010 at 9:12 am
SBA Loans Have Been Super Sized
October 19, 2010 at 9:04 am
SBA Funds $10 Billion In Jobs Act Loans
January 2, 2011 at 4:42 pm
Small Business Lending Fund Act in Consideration by Senate — Franchise Brokers Association FBA -Industry BLOG
March 13, 2012 at 11:08 am

{ 6 comments… read them below or add one }

Maxie L. Mauselle July 25, 2010 at 6:01 pm

Is the SBA going to waive the 2% loan fee?

John King July 27, 2010 at 10:03 am

The SBA fee waiver extension was not part of HR 4213 when it passed, but it is still on the table and will more than likely be included in the final version of HR 5297 (The Small Business Lending Fund Act aka The Small Business Lending Bill) which is currently being debated and possibly amended. Expectation is that it will be sorted out this week or next.

halani July 29, 2010 at 12:17 pm

i have a loan which approved by the lender but with a fee do you think i should go in the queue for non-fee? what are the chances and lead time?

John King July 29, 2010 at 12:24 pm

Hopefully the fee waivers will be extended in the coming days, but I would talk to your lender about going into the queue as well. A client we helped find funding went into the queue in early July and their loan funded within 2 1/2 weeks. Here is a link to the SBA site with current recovery loan queue status:
Recovery Loan Queue

Jose Betancourt October 3, 2010 at 11:29 pm

do you know where i can go to find a detailed review of this bill, H.R. 5297-39? specifically, i would love to see a plain english explanantion of the major changes this bill implements.

thank you.

John King October 4, 2010 at 10:33 am

I believe the “- 39″ refers to the page number of the bill. Here is a link to a very good summary by Robb Mandelbaum of the NY Times.

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