Two of the most effective economic recovery programs for small businesses in the United States are set to expire in late September unless Congress ends its election-year deadlock and acts to extend them.
Christopher Hurn, chief executive officer of Mercantile Capital Corp., a provider of U.S. Small Business Administration 504 loans for small business owners who want to acquire or develop their own facilities, said he’s worried that SBA 504 loans for small businesses are being overlooked as Congress grapples with more visible public policy issues.
Hurn said the two initiatives — the SBA 504 refinance program and the First Mortgage Lien Pooling program — significantly expand the benefits of SBA 504 financing for small businesses in the U.S. at a time when our economy needs those businesses to grow and create jobs.
“One of the most critical issues facing the small business sector in the U.S. today is the availability of capital. At a time when interest rates are at their lowest in a lifetime and the Federal Reserve is bending over backward to provide lending capital to major banks, traditional lenders are faced with significant regulatory pressure that’s made it difficult to impossible for many small businesses to obtain the financing they need to expand their businesses, refinance their commercial mortgages, create more jobs and do their part to restore the national economy,” Hurn said.
The SBA 504 Refinance Program enables SBA 504 lenders to offer below-market financing at very favorable terms to small business owners who need to refinance higher-interest conventional loans for their commercial property, according to Hurn.
Hurn also explained that the FMLP program created a secondary market for SBA 504 loans, thereby allowing lenders to generate liquidity and increase access to capital for more small businesses. “The FMLP program has become about 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,” he said.
The overall increase in SBA loan production in late 2011 and 2012 are due in large part to the SBA 504 refinance and FMLP programs, both of which include supplemental fees that make them budget-neutral. They’ve played a major role in Mercantile Capital and other SBA lenders reporting record loan volumes for the first six months of this year.
Since January, Mercantile Capital has closed 58 commercial loans to finance projects that total $220.7 million. That’s more than the company closed during all of 2011, and a 240 percent increase over the same time period last year. “Several of the small business owners we’ve worked with this year wouldn’t have been able to get funding for their projects without one or both of these programs,” Hurn said.
The SBA 504 refinance program and the FMLP program were established by the Small Business Jobs and Credit Act of September 2010 to be temporary — only 24 months each. Hurn explained that because of bureaucratic delays in Washington, D.C., these programs were hampered in their utilization and impact for the small business sector of our economy.
“Because of the delays in these programs — nearly 14 months for SBA 504 refinance and almost 19 months for FMLP — these programs need to be extended for at least one year each to allow us to continue to help more small businesses,” Hurn said. “The SBA 504 loan program is one of the most effective economic development and job creation programs the U.S. government has come up with,” Hurn said, “but a credit freeze will start again without these extensions,” he added.