HR 5297: Jobs Bill or SBA Lending Bill?
HR 5297 has been called both a “lending bill” and a “jobs bill” and it will be signed into law today by President Obama, which begs the question…which will it be? A lending bill or a jobs bill?
The answer: both.
It will be more of a “lending” bill” at first and a “jobs” bill second.
The reason is this bill is likely to help far more business owners refinance than those looking to start a business and hire new employees.
Admittedly, my data is somewhat unscientific and mostly based on calls and e-mails from business owners looking restructure their current debt to something more manageable…but, unscientific as it maybe, it still gives me a good pulse on what is going on on Main Street.
The question now is…How tough is it going to be to get a loan?
Well, the first thing to realize is this bill is not a miracle cure. It is not going to suddenly make bad loans into good loans, but as I mentioned in an earlier post the changes should allow banks to step up and do loans they were not doing before because they did not have the capital – or in the case of a 7a loan – a 90% SBA guarantee.
This legislation provides a way for small (and mid-sized) businesses to increase their cash flow by allowing more of them to refinance their commercial debt which will eventually lead to more business and more jobs.
Reasons there will be more Refinances/Job Retention than Job Creation:
1) Banks are still risk averse (in a big way) so startups and construction will still be tough.
2) Thousands of small businesses have commercial loans with balloons coming due and they will be looking to refinance.
3) Many of these same businesses no longer have the equity required to refinance conventionally and the SBA will (in many cases) allow 90% loan to value refinances…so HR 5297 could allow them to refinance out of a loan that is coming due and into a new longer term 20+ year SBA loan.
4) There are just not as many people looking to open new businesses now as there were a few years ago.
5) There are many existing businesses looking to consolidate debt and cut their payments.
6) The new larger loan amounts and new larger small business size limits will allow larger loans to be done and for larger businesses.
So will the Small Business “Jobs” Bill create jobs?
Yes, it definitely will, but it will take a while for the capital created by these loans to filter through the economy and create the amount of jobs being thrown around in the various estimates.
Bottom line: it will create a surge in SBA lending and it should be a nice shot in the arm for our economy.