SBA Lending News continued
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Misconceptions about SBA Lending
I guess we shouldn't continue to be astonished by supposed experts who peddle not only wrong, but deal killing advice about small business lending.
Take this Forbes article.
The author offers three takeaways for small business borrowers -- and they are all wrong.
1) Enlist the help of an expert
This is false, bad, costly information. You don't need representation to get a loan. You don't need a packager. You don't need a broker. While it may help in some instances, it is certainly not advice that should be at the top of the list. . . .
Entrepreneurs Wish List For Obama's Second Term: Decrease Deficit, Increase Jobs And Make Loans Easier To Get
Ray Keating, chief economist for the Small Business & Entrepreneurship Council, opined that the second time round will also see much of the same policies that governed small business as last time. There will not be any impactful changes, he said. Moreover, the President means what he says and he will not be open to negotiations about the commitments he made during his election campaign. He certainly will not backtrack. Investors and entrepreneurs, who make money beyond a certain amount, can accept to be taxed heavily. . . .
SBLF Small Business Lenders Increase Small Business Lending 56%
This is the best article we've come across about the Small Business Lending Fund.
Writes SNL's Harish Mali, "While disbursements under the Small Business Lending Fund were much lower than expected, the banks that chose to participate have fulfilled the program's aim and grown loans at an accelerated pace."
The 277 lenders that accepted SBLF funds grew their qualified small business loans at an average rate of 56% over the course of the program. . . .
A New Trend? Two Leading SBA Lenders Acquired
Native-American owned Borrego Springs Bank, the largest SBA micro 7(a) lender in the country, has been sold to Sonoma Bank.
Sonoma says it will retain the 18 person SBA loan department.
"Borrego will continue to operate under its current name following the acquisition, but Sterling (Sonoma Bank) plans to eventually bring the bank under its brand. The acquisition has been approved by both companies' boards of directors and is expected to be completed in the first quarter of 2013. . . .
Are Merchant Cash Advances Another Word for a Small Biz Payday Loan?
New York Times small business blogger Ami Kassar examines the true cost of merchant cash advances.
With some lenders getting returns of more than fifty percent, this small business lending niche can be very profitable with the right lending model.
Unfortunately, for Main Street entrepreneurs cut off of from traditional capital, they have to pay the rates, or close up shop.
Writes Ami, "The sad reality of today's credit markets is that many small businesses have no choice but to consider these types of loans. In our work at MultiFunding, we often find that there is no better option. Still, whenever I am forced to put a client into one of these high-rate loans, I think about Mr. Maguire and the struggle he is facing to build his business, as well as his crew of four employees who count on him. Yes, the merchant cash advance lenders and the hedge funds that back many of them are filling a need in today's market. But there has to be a better way." . . .
Refinancing Existing Debt: Short-term versus Long-term note rules
SBA loan proceeds may be used to refinance existing debt. However, make sure that the loan to be refinanced is eligible according to SBA Program Requirements.
The original use of loan proceeds drive eligibility. If the original loan purpose was ineligible for SBA financing at the time it was made, SBA is unwilling to pay off that Note with a SBA loan now.
Refinancing must provide a substantial benefit to the small business applicant. SBA is more willing to refinance a short-term debt because they are already on unreasonable terms, because the borrower may be put in a precarious position to pay a large balance off at time of maturity. However, long-term notes may also be eligible to be refinanced depending on if a payment improvement can be made. . . .
Obama to pursue SBA merger with other agencies if he wins
You've probably forgotten President Barack Obama's proposal to merge various federal offices that deal with business, including the Small Business Administration, into one agency.
That's because nothing happened after Obama proposed the idea in January. But Obama hasn't forgotten about it -- in fact, he brought it up during an interview broadcast this morning on MSNBC's "Morning Joe" show. . . .
Cautious lenders make financing difficult
Through these recent tumultuous economic times, financing hotels has undergone a considerable sea change. In the past years, financing for a hotel property priced below $6 million was 90% through Small Business Association loans with much of it channeled through the SBA 504 program. While lenders were guaranteed approximately 75% of the loan value on an SBA 7(a) loan, a conventional loan on the 504 program gave lenders a loan at 50% of the sale value. The common belief at the time was that it would be impossible for the value to decrease to less than 50% of an arms-length purchase price. . . .
What to do If the OIG is Investigating You
October 24, 2012
By Norman E. Greenspan, Esquire
Starfield and Smith, PC
What does it mean to be the subject of an investi . . .
Complete Connect - The Three SBA Requirements Pertaining to Affiliate Businesses
Check out This Week's Complete Connect Article: The Three SBA Requirements Pertaining to Affiliate Businesses. Determining whether the small business company has affiliate businesses is important because SBA requires they be considered not only in the eligibility determination but, also, in the credit analysis. . . .
Wells Fargo Approves a Record $1.24 billion in SBA Loans for FY12
Wells Fargo approved a record $1.24 billion in Small Business Administration (SBA) loans in federal fiscal year 2012 (Oct. 1, 2011 - Sept. 30, 2012) and for the fourth consecutive year is America's leading SBA 7(a) lender in dollar volume. This is the second year in a row that Wells Fargo has approved more than $1 billion in SBA 7(a) loans to small business owners - the only lender to achieve this milestone. An SBA preferred lender in all 50 states, Wells Fargo also is the second largest SBA lender in units extending 3,176 SBA 7(a) loans in fiscal 2012.
"It is very rewarding to know that every SBA loan we extend is helping American small business owners build their businesses for the long term," said David Rader, head of Wells Fargo's SBA Lending Division. "At Wells Fargo, we work hard to provide the financing that supports business growth and drives economic development and job creation in every community we serve. The fact that we approved more than $1 billion in SBA loans each of the last two years is a result of that hard work. While we take pride in our market leadership, we're more proud that we provided the essential capital for thousands of customers across the country to start or invest in a small business." . . .
After One Year, What Has the Small Business Lending Fund Really Done For Us?
A recent report from the Treasury Department says that one year after its implementation, institutions participating in the Small Business Lending Fund have increased their lending to small businesses by $6.7 billion. According to a spokesperson, through September 2011, 332 banks had received $4 billion in capital funding, nine out of ten increased their small business lending, and three-fourths had increased their lending by more than ten percent.
But is this an indicator of the SBLF's success? Some financial experts remain skeptical of the SBLF and initiatives like it because there is so much capital not being used. "In context of what banks have in reserves already, and how much capital they're sitting on, I don't think this is really making any substantive difference in the economy," said Ray Keating, chief economist for the Small Business & Entrepreneurship Council, "Right now, non-borrowed reserves are in the neighborhood of $1.5 trillion in depositories." . . .
SEC Receiver Says 10 of 72 SB Capital Loans "Impaired"
It's been three months since the SEC froze the assets and took possession of Mark Feather's non-bank lending company, SB Capital.
In addition to accusing Feathers of running a ponzi-like scheme with his investors, it also appears SB Capital had issues with credit quality.
Of the 72 loans on the books, the court-appointed receiver says ten, two SBA and eight non-SBA, loans are impaired.
The most notable takeway from the 37 page report is the Receiver completely ignores the concept that SB Capital may have repair and denial exposures on its sold SBA 7(a) loans. . . .
A big breakthrough in tiny loans
"Small commercial loans don't make money for banks," he said, "because rather than use the cheap personal FICO score, they have to gather business data, which is very hard to do with micro businesses."
By contrast, working intensely with tiny businesses is a primary focus of CDFIs, which have their roots in decades-old government efforts to reduce poverty. The CDFIs expanded their funding in the 1970s by reaching out to religious institutions, individuals and other private sources, but the biggest boost came from two early initiatives by the Clinton administration.
The Community Development Financial Institution Fund, a Treasury Department agency that certifies CDFIs and makes awards to them, was created in 1994. A year later, the federal Community Reinvestment Act was revised so that banks could automatically receive credit toward their obligation to lend in lower-income areas by providing funding to CDFIs. The banks typically lend money at 2% to 3% interest to the CDFIs, which use the cheap funds to make loans of their own.
Over the years, CDFIs have extended about $40 billion to tiny U.S. businesses, almost all of it coming from banks and private investors. . . .
SBA OIG Takes Aim At "High-Risk Lenders"
A new OIG Audit reviewed 16 "high-risk" lenders from a universe of 57 top peer group lenders with SBA-guaranteed loan portfolios of $100 million or more that received high-risk ratings for at least one quarter from July 2008 to September 2010. All of these lenders made 7(a) loans and had the ability to make Recovery Act loans.
What OIG Found
In its reviews of lender operations, for 8 of the 16 sampled lenders, we found that the SBA did not always recognize the significance of lender weaknesses and determine the risks they posed to the Agency. Additionally, the SBA did not link the risks associated with the weaknesses to the lenders' corresponding risk ratings and assessments of operations. Further, the SBA did not require lenders to correct performance problems that could have exposed the Agency to unacceptable levels of financial risk. . . .
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