Businesses hoping to escape paying fees for some of the U.S. Small Business Administrations premiere loan programs are at the mercy of Congress.
Federal funding for fee relief for the SBAs 7(a) and 504 loan guarantee programs was exhausted last week, and Congress has yet to pass an extension. In the meantime, the administration has activated its waiting list for applicants.
For Florida businesses, some say, the loans provided an expanded access to capital that is all too rare in a time of economic turmoil and decreased lending to small businesses.
Since the $787 billion federal stimulus act that took affect in February 2009, the federal government has injected the SBA with extra taxpayer money, sometimes erratically, to allow it to waive fees to customers on some of its guarantee programs.
Its been important, said Ralph Ross, deputy district director of the SBAs North Florida region. We could see an effect immediately.
With the extra federal money in hand, the SBA could waive fees that ranged as high as 3.75 percent for businesses participating in the 7(a) loan guarantee program, a broad loan that allows the SBA to guarantee loans from commercial lenders for anything from real estate to workforce capital.
The funding also allowed the administration to raise its guarantee cap for the program to 90 percent of a loan borrowed from a commercial lender. The standard limits that the administration could afford without the extra money ranged from 75 percent to 85 percent, depending on the loan size.
The extra federal money was also used to waive fees for SBA guarantees of 504 loans, long-term loans often used for real estate, equipment and other long-term assets. The federal stimulus money for the program, taken out with loans from a certified development company and a bank, eliminated a 1.5 percent maximum for the SBA portion of the loan, about 40 percent, and a .5 percent fee maximum for the bank portion.
In North Florida, 73 7(a) loans were guaranteed in North Florida from Oct. 1, 2009, to April 30 of this year, for a total of almost $102.13 million, according to SBA reports. For the same period, five 504 loans were guaranteed for a total of $62.6 million.
In South Florida, 769 7(a) loans were guaranteed between Oct. 1, 2009, and April 30 of this year. For the same period, the SBA guaranteed 259 of the 504 loans in South Florida.
The Recovery Act has most definitely had a positive effect on SBA lending in our district, said South Florida SBA district director Francisco A. Pancho Marrero. We have turned the corner, business owners are more positive and while we still have a long way to go, the early signs of recovery are clearly evident.
The federal stimulus funding for the loan fees expired in November, but the programs have continued thanks to several federal emergency injections of money. The last one ran out last month, and an extension is now dependent on whenever Congress gets to discussing it after its week-long Memorial Day break.
Floridas small businesses are still in dire straits, said Todd Kourocek, president and CEO of Florida First Capital Finance Corporation, a nonprofit certified development company. Credit is scarce and banks big and small have cut their lending to small businesses, Kourocek said.
Even after being rescued by the federal Troubled Asset Relief Program, large financial institutions are reducing their lending to small businesses, he said.
And the long delay in getting the currently proposed extension, discussed since last year, is frustrating.
If this issue was viewed as urgently as the bank bailout, this would have been done in 2009, Kourocek said.
Reach Alex Tiegen at 561-329-5389 or Alex.Tiegen@gmail.com.
