SBA Business Loans - status

2008 was a very difficult year for everyone involved in the business of commercial mortgages and SBA commercial loans are no exception, to the surprise of many. The numbers are down across the board and some estimates are coming in that the SBA program, the seventh (the most popular) you have closed about half of what they did in 2007, in terms of loan volume. Number of loans is also closed down.

Many operators have been really shocked by this result. After all, the government established the program in an effort to help stimulate the economy and many players to bet that the SBA loans would be relatively stable and intact.

There seems to be a couple of key issues here that closures have slowed over the obvious problems of liquidity. For one, and this is not a surprise, both the SBA 504 and 7a are expensive compared to traditional loans. From the perspective of the broker, the sale of 2.75% SBA guarantee fee on the seventh program is not an easy task. It does not matter to many borrowers, especially those used for conventional loans more competitive, that the fee is rolled into the loan amount. O that this may be your only real option.

Furthermore, the rate is adjusted quarterly scare some borrowers away as contemplate what and where the first one could go. We had many borrowers talk about the days of Jimmy Carter when the first was in 20%. So many borrowers are going through and just sitting on the bench waiting to go conventional. For example, we have several borrowers waiting for hard money loans and prefer to pay their double-digit rates to refinance into a variable rate. The problem is that they do not want to refinance again in a few years and pay for the costs of third party again. Of course this assumes that conventional loans back.

Another problem was that the SBA has recently rewritten the manual of 800 pages and made it a more manageable 200 pages. A great effort for greater simplicity and efficiency have unfortunately caused a lot of confusion because many investors were left with unanswered questions about what the new guidelines are, exactly. This confusion and doubt has been an incentive for banks to pass on the SBA programs. Unfortunately the timing of this could not be worse.

What are the problems of liquidity? As many readers are aware that most banks do SBA loans of funds with the intent to sell off the debt on the secondary market trading. Now that this market is so beaten and that there are few buyers, banks must hold onto the debt on its balance sheet. For some banks this goes against their business model and others is not even an option as they have their own liquidity problems. Many banks can not or do not want to be portfolio lenders.

However, despite the problems it is worth noting that SBA loans are still standing and there are banks that are still closing loans with SBA guarantees. While conventional substantially complete for the moment. For example, try getting a loan car wash done right now without the SBA guarantee. Hotel or a restaurant loan or a loan. There are few conventional loans out there that will also discuss a special use property with you, if it is going through a program sponsored by the government .......