Trying to get a small business start up loan is next to impossible! Kind of goes without saying, doesn’t it? I mean, who hasn’t heard how challenging the bank lending picture is for small businesses? We speak daily with small business owners, across the country in a multitude of industries. The story is always the same. Banks aren’t lending and they have become extraordinarily conservative with respect to their loan / line approvals.
Worse yet are the numerous stories of banks coming back around to their small business customers to ‘reevaluate or review’ a loan package or line of credit. The banks have been doing this with regularity over the past year and a half primarily because they have economic jitters (and regulators breathing down their necks) and, the unconditional right to do so. Often times, this activity requires extraordinary amounts of work on the part of the business owners (a major distraction) in order to provide the bank with an updated inventory count or some other form of business valuation, to appease them enough to move their company off the hot seat.
Speaking as a small business owner, it’s especially frustrating to see all of this going on, knowing full well the significant contributions that small businesses make to the US Economy in the two leading areas that determine the health of the economy at large; real GDP (gross domestic product) and net new jobs created. According to the SBA, “small businesses create most of the nation’s new jobs, employ about half of the nation’s private sector workforce, and provide half of the nation’s nonfarm, real gross domestic product…”
Small Business Act
So here’s the good news, sort of: HR 5297 – Small Business Jobs and Credit Act of 2010. This SBA bill, sponsored by Rep. Barney Frank of Massachusetts, is big news for small businesses. It passed the House but… we’ll get to that it just a moment.
HR 5297 stands to benefit small business in some big ways. First, it provides a 90% loan guarantee via the SBA, giving the banks the security that they need to make a loan. Compared to the normal 75% guarantee, it can mean the difference between getting the loan or not. Second, there are no fees associated with this loan package. This alone can save a small business tens of thousands of dollars! Third, the loan limit has been increase to $5 Million. The bill also allows businesses with up to $15 Million in net worth to qualify. The previous limit was $8.5 Million. In addition, small businesses with existing SBA loans that have balloon payments coming due can refinance their commercial loans through this program.
Now for the bad news: Politics…need I say more? HR 5297 passed the House of Representatives on June 17th with 241 in favor, 182 opposed and 9 abstaining. A small margin for sure but, it passed. It has since stalled in the Senate due primarily to a Republican filibuster.
This post is not intended to be a political commentary. It’s my hope that our representatives in the Federal Government will have the good sense and the higher calling to put aside their differences and truly act in the best interest of the people by passing this bill.
Monday, September 13th is the day Senators head back to Washington after their summer recess. Waiting for them, front and center, will be HR 5297. As you can imagine, there is a lot of energy and anticipation surrounding this particular bill. With all of its attributes and the fact that it could be very profitable for the banks, it stands to be a win-win-win. Small businesses win, they get funded. Banks win, they make profitable loans. Government wins, they serve their constituency, create real GDP and jobs.
The SBA lending community (approved banks) has started to come alive recently and, according to several business owners that I have talked to across the country, banks are now reaching out to their small business customers in order to reopen funding discussions. Presumably, this is in anticipation of the passage of HR 5297.
If you have not heard from your banker recently and you are interested in seeking funding through the SBA, you owe it to yourself to put a call in to him or her and find out what they are doing to prepare for the potential passage of HR 5297. More importantly, you should find out what they can do for your small business specifically.
The entire 122 pages of HR 5297 is available.