August 2010 Newsletter

August's SBA 504 20-year effective rate is 4.93%. 10-year bonds are only sold every other month. The July SBA 504 10-year bond effective rate was 4.169%. (Rates may vary slightly based on approval date.)

As with last month, the most urgent topic during July has been the extension of borrower fee reductions on both 7(a) and 504 loans. The National Association of Development Companies (NADCO) has continued meeting with different members of Congress in an effort to further extend Recovery Funds through December 2010. Below is an update of where this bill stands (HR 5297).

Borrowers will need to decide if they want to submit their 504 application under the Recovery Act and wait in the loan queue, or submit with the regular 504 fees. The decision will be driven by when the 504 loan dollars are needed, and if the borrower has time to wait. There is no guarantee that Congress will even pass HR 5297.

Update on 504 Fee Reductions from ARRA

On July 29, 2010 the Senate again failed to pass the "Extender bill" by a vote of 52 to 48. The bill has failed to pass for a number of political reasons not related to the SBA programs.

Fee relief provisions for both SBA 504, 7(a) and the 90% 7(a) guarantee are all included in the "Extender bill", which was passed through House back in early June. The bill has yet to be passed by the Senate. The Senate goes on a month recess beginning on August 6; therefore, they will not be addressing issues with this bill until September. The other forseable issue is that both Republicans and Democrats will be focusing on November elections once back from recess.

At this time it is recommend to talk with borrowers and EDF staff prior to submitting SBA 504 applications about the Recovery Act. There is not enough stimulus money available to put a borrower in the loan queue and receive stimulus money by the end of the month. This can cause potential delay's in bank closings on the 90% interim loan.

EDF can submit the application under the normal 504 program. However, recovery act money will not be available for those borrowers if fee waivers are extended.

Refinancing Update

Also addressed in last month's newsletter was the "Small Business Jobs Bill," As with the "Extender Bill" the Senate has not been able to pass this bill due to political reasons not involving the SBA programs.

This bill contains both the expansion of the maximum 504 loan size to $5 million (permanent increase), and even more importantly, the refinancing provisions (temporary for a period of two years).

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