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Concerns Raised over Small Business Administration Loan Program


Saturday, February 19th, 2011
News

Congress recently authorized legislation that helps companies at risk of foreclosure by implementing a new loan program. This past Friday, the Small Business Administration (SBA) indicated the program is ready to be implemented. However, concerns have been raised over the restricted access to these loans to the point where many businesses on the verge of foreclosure would not qualify. Among those restricted from the loans are any companies already possessing SBA-backed real estate loans, according to the Los Angeles Times.

In a statement issued by Scott Hauge, the president of an advocacy group named Small Business California, he simply stated that the bill was “awful” and that that bill is incapable of doing what it was intended to do. The strictures contained in the bill state that businesses facing ballooning payments on property, which their business is established will be afforded the opportunity to refinance with government guaranteed loans. However, the loans offered in this legislation only apply to companies whose mortgages are due in the next two years. The program also stipulates that this will only cover properties worth less than what is currently owed on their mortgages.

In the near term, the strict loan terms could also make loans less attractive to lenders, but the SBA has responded to this saying that while the terms are tight, as many as 20,000 businesses will be immediately eligible to participate in the program providing nearly $15 billion to small businesses in government-backed loans. While there are clearly limitations to the program, the SBA 504 Debt Refinancing Program is heralded as the most significant change in the this sector since the beginning of the global recession. The program is intended to be temporary with a sunset date set for September 27, 2012.

Sources:

http://www.latimes.com/business/la-fi-sba-loans-20110218,0,2483282.story

http://www.northbaybusinessjournal.com/29978/sba-approves-504-loans-for-refinancing-commercial-real-estate/

http://www.bizjournals.com/houston/news/2011/02/18/sba.html

 

 



Article by Andrew Timm

The views expressed are the subjective opinion of the article's author and not of FinancialAdvisory.com



Tags: debt , refinancing , small business