30-Day Extension of SBA Recovery Act

On March 2nd the President signed into law a temporary 30-day extension of the SBA Recovery Act provisions with a $60 million appropriation. The 30-day extension provides increased government guarantees and the elimination of fees on small business loans.

http://www.whitehouse.gov/the-press-office/statement-president-obama-signing-ui-extension-bill

Here are a few thoughts on the current state of government-backed financing:

1. More and more lenders are turning down conventional loan requests and directing them to government-backed programs (SBA loans). The current environment gives banks little incentive to make loans, so loans with a government guarantee are virtually the only ones that make sense in what many lenders consider to be “risky” times. Of course, this isn’t the case everywhere – some banks are still making conventional loans – it’s just getting harder to find those active lenders.
2. Lower fees and 90% loan-to-value (for real estate) make them attractive for borrowers. The maximum interest rate is now 6% on a ten-year loan.
3. Legislation has passed in the House and is pending in the Senate that will increase the maximum SBA loan from $2 million to $5 million. Great news for mid-market buyers.

As always, Kasper & Associates is happy to discuss what we’re seeing in today’s North and Central Texas M&A; market. Call 817/738-4220 or e-mail contact@kasperassociates.com.