Thursday, February 17, 2011

Refinancing Possible for Commercial Mortgages Facing Balloon Payments

Release Date: February 17, 2011
Contact: David J. Hall (202) 205-6697
Release Number: 11-15
Internet Address:


WASHINGTON, D.C. – Small businesses facing maturity of commercial mortgages or balloon payments before Dec. 31, 2012, may be able to refinance their mortgage debt with a 504 loan from the U.S. Small Business Administration under a new, temporary program announced today.

The new refinancing loan is structured like SBA’s traditional 504, with borrowers committing at least 10 percent equity and working with third-party lending institutions and SBA-approved Certified Development Companies in the standard 50 percent/40 percent split. A key feature of the new program is that it does not require an expansion of the business in order to qualify.

SBA will begin accepting refinancing applications on Feb. 28. The program, authorized under the Small Business Jobs Act, will be in effect through Sept. 27, 2012.

“The economic downturn of recent years and the declining value of real estate have had a significant, negative impact on many small businesses with mortgages maturing within the next few years,” said SBA Administrator Karen Mills. “As a result, even small businesses that are performing well and making their payments on time could face foreclosure because of the difficulties they face in refinancing and restructuring their mortgage debt. This temporary program is another tool SBA can provide to help these small businesses remain viable and protect jobs.”

The SBA initially will open the program to businesses with immediate need due to impending balloon payments before Dec. 31, 2012. SBA will revisit the program later and may open it to businesses with balloon payments due after that date or those that can demonstrate strong need in other ways.

“We are making this initial restriction to make sure our funding goes first to small businesses with the most need,” said Steve Smits, SBA Associate Administrator of Capital Access.

Borrowers will be able to refinance up to 90 percent of the current appraised property value or 100 percent of the outstanding mortgage, whichever is lower, plus eligible refinancing costs. Loan proceeds may not be used for other business expenses. Existing 504 projects and government-guaranteed loans are not eligible to be refinanced.

Congress authorized SBA to approve up to $15 billion in loans under this program ($7.5 billion in both fiscal 2011 and 2012). Together with the first mortgage, this temporary program will provide up to $33.8 billion of total project financing. Additional fees charged to the borrower will cover the cost of this refinancing program and as a result no subsidy will be needed. The program is expected to benefit as many as 20,000 businesses.

SBA’s traditional 504 loan program is a long-term financing tool, designed to encourage economic development within a community. A 504 loan provides small businesses with long-term, fixed-rate financing to acquire major fixed assets for expansion or modernization.

Typically, a 504 project includes three elements: a loan (or first mortgage) secured with a senior lien from a private-sector lender covering up to 50 percent of the project cost, a second mortgage secured with a junior lien from an SBA Certified Development Company (backed by a 100 percent SBA-guaranteed debenture) covering up to 40 percent of the cost, and a contribution of at least 10 percent equity from the small business borrower.

Monday, February 7, 2011

SBA Re-launches Dealer Floor Plan Pilot Loan Program

New maximum loan size increased to $5 million by Small Business Jobs Act . . .

WASHINGTON – A pilot loan program aimed at increasing access to inventory financing for auto, boat, RV and other dealerships will be re-launched Tuesday (2/8) and will be effective through Sept. 30, 2013, the U.S. Small Business Administration announced today.

The Small Business Jobs Act of 2010 included a provision for re-launching SBA’s Dealer Floor Plan (DFP) Pilot Loan program, which first became available in July 2009. The pilot is part of the SBA’s overall 7(a) loan guarantee program. The Jobs Act also increased the maximum size for 7(a) loans to $5 million, up from $2 million, which includes loans made through the DFP pilot program.

“As a result of the credit crunch in late 2008 and early 2009, dealerships saw a significant decline in the availability of this type of inventory financing,” SBA Deputy Administrator Marie Johns said. “SBA’s original DFP pilot program was launched as a way to expand the availability of floor plan financing and the Jobs Act added further enhancements to that program, including allowing for larger loan sizes.

“Dealerships are a cornerstone of local business communities,” Johns continued. “As we continue to see our economy recover, the re-launch of this pilot provides another tool, alongside SBA’s other programs, to help them succeed and create jobs in their local communities.”

The rules and regulations for the pilot will be available Tuesday on the website of The Federal Register, and in print editions on Wednesday. A procedural guide to the program will be posted on the SBA website at:

Floor plan financing is a revolving line of credit that allows a dealership to obtain financing through SBA’s 7(a) program for inventory that can be titled, such as autos, RVs, manufactured homes, boats and trailers. As each piece of collateral is sold by the dealer, the loan advance against that piece of collateral is repaid. As the loan is repaid, the dealer can borrow against the line of credit to add new inventory.

The program is available to qualifying small businesses, including new and used automobile, motorcycle, RV, manufactured homes and boat dealers. SBA has issued a new maximum alternative size standard to allow businesses with $15 million net worth and $5 million in net income measured over two years to have access to the program.

All SBA-approved lenders may make DFP loans. Lenders with more than $1 billion of floor plan lines of credit in their current portfolios may apply for delegated authority, which would expedite the lending process.

Borrowers interested in obtaining a DFP loan should contact their lender or their nearest SBA field office to get a list of SBA-approved lenders in their area who may be participating in the program. Local district offices and contact information, as well as information on this and other SBA programs and resources, can be found at or by calling the SBA Answer Desk at 1-800-U-ASK-SBA or TDD 704-344-6640.

Wednesday, February 2, 2011

SBA Announces Contracting Program

First Contracts Expected to be Awarded through WOSB Program
By Critical Fourth Quarter of Fiscal Year 2011

Release Date: February 1, 2011
Contact: Tiffani Clements (202) 401-0035
Release Number: 11-09
Internet Address:


WASHINGTON – Women-owned small businesses can begin taking steps to participate in a new federal contracting program on Friday, Feb. 4, the U.S. Small Business Administration announced today. The new Women-Owned Small Business (WOSB) Federal Contract Program will be fully implemented over the next several months, with the first contracts expected to be awarded by the fourth quarter of fiscal year 2011.

“Implementing the Women-Owned Small Business contracting rule has been a top priority for the Obama Administration and SBA,” said Administrator Karen Mills. “Women-owned businesses are one of the fastest growing sectors of the economy. As we continue to look to small businesses to grow, create jobs and lead America into the future, women-owned businesses will play a key role. That’s why providing them with all the tools necessary to compete for and win federal contracts is so important. Federal contracts can provide women-owned small businesses with the oxygen they need to take their business to the next level.”

The WOSB Federal Contract Program will provide greater access to federal contracting opportunities for WOSBs and economically-disadvantaged women-owned small businesses (EDWOSBs). The Program allows contracting officers, for the first time, to set aside specific contracts for certified WOSBs and EDWOSBs and will help federal agencies achieve the existing statutory goal of five percent of federal contracting dollars being awarded to WOSBs.

On Feb. 4, SBA will release instructions on how to participate in the program, as well as launch the secure, online data repository for WOSBs to upload required documents, on its website: SBA will also release an application to become an SBA-approved third party certifier for this program on that date. This will be the first version of the application. SBA welcomes comments and suggestions on this first version of the application.

During the ramp up period over the next several months, SBA is encouraging small business owners to review program requirements and ensure their required documents are uploaded to the repository. WOSBs also will need to update their status in the Central Contractor Registration (CCR) and the Online Representation and Certification Application (ORCA) to indicate to contracting officers that they are eligible to participate. The General Services Administration is currently updating these systems and they are expected to be completed in April, 2011.

Similarly, the WOSB rule in the Federal Acquisition Regulation (FAR), which is the companion to the SBA rule, is now going through final review, and is also expected to be issued by April. With these pieces in place, SBA expects to see the first contracts awarded through the program by the all-important fourth quarter, when the largest percent of federal contracts are awarded.

Every firm that wishes to participate in the WOSB program must meet the eligibility requirements and either self-certify or obtain third party certification. At this time, SBA has not approved any third party certifiers. Regardless of their certification method, WOSBs must also upload required documents proving their eligibility to a secure online data repository developed and maintained by SBA.

To qualify as a WOSB, a firm must be at least fifty-one percent owned and controlled by one or more women, and primarily managed by one or more women. The women must be U.S. citizens and the firm must be considered small according to SBA size standards. To be deemed “economically disadvantaged”, a firm’s owners must meet specific financial requirements set forth in the program regulations.

The WOSB Program identifies eighty-three four-digit North American Industry Classification Systems (NAICS) codes where WOSBs are underrepresented or substantially underrepresented. Contracting officers may set aside contracts in these industries if the contract can be awarded at a fair and reasonable price, the contracting officer has a reasonable expectation that two or more WOSBs or EDWOSBs will submit offers for the contract and the anticipated contract price is not greater than $5 million for manufacturing contracts and $3 million for other contracts.

Each stage of implementation is part of SBA’s mission to make the Program efficient and user-friendly, and to ensure its benefits go only to qualifying WOSBs. SBA is excited to launch this new program to provide WOSBs with increased opportunities to compete for and win federal contracts, ultimately helping WOSBs create and retain more jobs.

For more information on the Women-Owned Small Business Program or to access the instructions, applications or database, please visit