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Jobs Act Provides Critical Resources for SBA Loan Programs and Small Business Owners

Oct 2010

Small Business Administration (SBA) loan programs are getting a lot of attention these days and the 504 is no exception. Between record setting low interest rates and several significant changes under the recently enacted Small Business Jobs and Credit Act of 2010 (H.R. 5297), the 504 program is stronger and more capable than ever to serve the commercial financing needs of small business owners.

Overall, the Jobs Act will support an estimated $14 billion in small business lending with only $505 million in taxpayer funds, according to the SBA. The law extends the successful SBA-enhanced loan provisions while offering billions more in lending support and tax breaks for entrepreneurs and small business owners.

Following is an overview of the changes, including improvements to the 504 program.

Enhanced Loan Provisions:

• Fee waivers are temporarily continued for both the 504 and 7(a) programs through Dec. 31, 2010, or until the appropriation funds are exhausted.
• The 90% guarantee on 7(a) loans is temporarily continued through Dec. 31, 2010.

Increased Loan Limits:

• 504 and 7(a) loan limits are permanently increased from $2 million to $5 million; for small manufacturers and “green” initiative projects under the 504 program, the limit is increased to $5.5 million (SBA amounts only). This means larger projects are now eligible for SBA financing and borrowers who already have loans with the SBA can now return for additional funding.
• Microloan limits are permanently increased from $35,000 to $50,000, helping larger entrepreneurs with start-up costs and small business owners in underserved communities.
• SBA Express loan limits are temporarily increased from $350,000 to $1 million (expires Sept. 27, 2011).

Alternative Size Standards:

• Businesses with a maximum tangible net worth of not more than $15 million and average net income after Federal income taxes (excluding carry-over losses) for the two full fiscal years prior to application of not more than $5 million are now eligible for SBA financing. (Note: temporary until the SBA publishes a permanent regulation.)

504 Debt Refinancing:

• Small business owners holding commercial real estate loans with undesirable rates will now have the opportunity under this temporary two-year program to refinance their loans using the 504 program at very desirable below-market, fixed interest rates. (Note: pending final SBA policy.)

504 First Mortgage Pool Guarantee Program:

• The law extends the sunset until September 2012 on this new temporary program for partial SBA guarantees on eligible pools of 504 first mortgages to be sold on the secondary market. (Note: Florida First Capital is currently seeking eligible funded loans in order to build efficiently sized loan pools that result in the maximum price paid to the selling lender. For more information, please contact Deborah Petrell, SVP and Sales & Marketing Manager for Florida First Capital, at 561.756.1745 or email her at deborah@ffcfc.com.)

Small Business Intermediary Lending Pilot:

• In six to 12 months, the law will provide for funding up to $20 million per year in small business loans over the next three years for an intermediary-facilitated loan program targeting small businesses that need loans up to $200,000.

Small Business Exporting:

• The Export Express pilot loan program becomes permanent under the law with 90% guarantees for loans up to $350,000 and 75% for loans between $350,000 and $500,000.
• In coming months, the law will provide $90 million in competitive grants over next three years under a State Trade and Export Promotion Grants pilot program for states to help small business owners with exporting.

Training and Counseling:

• In coming months, the law will provide $50 million in grants available to Small Business Development Centers.

Tax Relief for Small Businesses:

• Eight key tax cuts are aimed at helping small businesses invest in their firms and create jobs:

1. The highest small business expensing limit ever of $500,000.
2. Carry-back provisions on net operating losses of up to five years.
3. Accelerated/bonus depreciation.
4. Zero capital gains taxes for those who invest in small businesses.
5. Increased deductions for start-ups.
6. Deductions for employer-provided cell phones.
7. Deductions for health insurance costs for the self-employed.
8. Limitations on penalties for errors in tax reporting that disproportionately affect small business.

Small Business $30 Billion Lending Fund:

• The law will provide smaller community banks with low-cost capital (as low as 1%) if they go above and beyond 2009 small business lending levels.

State Small Business Credit Initiative:

• The law will provide up to $1.5 billion to support state-run small business lending programs.

Source: SBA. If you would like more detailed information on the Small Business Jobs Act, visit www.sba.gov/jobsact.

For more information about 504 loans in Florida, contact Florida First Capital by visiting www.ffcfc.com, emailing us at insider@ffcfc.com or calling 888.320.5504.