Next month two budget-neutral economic recovery programs for small businesses will expire unless Congress ends its election-year deadlock and extends them. The refinance provision of the U.S. Small Business Administration (SBA) 504 loan program and the First Mortgage Lien Pooling (FMLP) program have provided a needed financial lifeline for small businesses over the past 18 months, but they face the budget ax if not extended.
SBA loan volumes increased in late 2011 and 2012 due in large part to these programs. SBA 504 refinances accounted for 14.7 percent of all SBA 504 loans made in the first quarter of 2012, and 20.6 percent of total SBA 504 dollars during that time period. Nearly 15 percent of all SBA 504 loans made today are FMLP loans.
In an effort to save these two budget-neutral SBA lending programs, I launched an online petition asking the U.S. House of Representatives Committee on Small Business and U.S. Senate Small Business & Entrepreneurship Committee leaders to extend the two programs by one year each.
Availability of capital is still the biggest obstacle facing small business owners in the U.S. today. Despite record-low commercial loan interest rates and easier access to lending capital for major banks, heavy regulatory pressure has limited traditional lenders from approving more small business loans. Excessive regulations on major banks have made it nearly impossible for even successful and growing small businesses to obtain financing.
The SBA 504 loan refinance provision allows small business owners to refinance commercial mortgages with longer-term, below-market, fixed interest rates. The FMLP program creates a secondary market where lenders can re-sell a portion of SBA 504 first mortgage loans, allowing them to increase their liquidity and capacity to make more small business loans.
The FMLP program has become the only viable financing source for assisted living facilities, daycares, auto repair shops, restaurants and hotels because conventional lenders generally won't finance these types of properties.
The SBA 504 program, which helps small business owners acquire or develop their commercial property, has historically been a zero-subsidy program, meaning that no tax dollars are required to keep it running. Loans made under this program have helped create hundreds of thousands of U.S. jobs, and if viewed over its lifetime, it has been one of the most cost-effective economic development programs ever created by the U.S. government.
Established by the Small Business Jobs and Credit Act of September 2010, both programs were subjected to severe bureaucratic delays -- 14 months for the refinance program and 19 months for the FMLP program -- which hampered their use and impact. To let these programs expire on September 27, 2012, as they continue to gain momentum and meet the small business credit marketplace needs, would be unwise and irresponsible. I ask for your support of this petition to get Congress to extend these beneficial, budget-neutral programs for at least one more year.
Follow Chris Hurn on Twitter: www.twitter.com/504Experts