The National Association of Development Companies (NADCO) released its monthly Small Business Lending Report (SBLR)
The August report showed a drop in commercial real estate and equipment finance loans to small businesses.
There were 504 loans in August (as compared to 590 in July) a marked drop from the 12-month average of 643 loans. The 20-year monthly loan pool size was $325,494,000, a 36% drop from $506,996,000 a year ago. This month’s debenture rate is 3.16% compared to 2.37% a year ago.
As part of the JOBS Act of 2010, small businesses in good financial standing were enabled to refinance their old, expensive debt locked up in their property and use the savings to reinvest in growing their businesses through the Small Business Administration’s (SBA) Real Estate Advantage (504) Loan Debt Refinance program.
“Debt Refi” was enacted as a temporary program and during that time more than 2,700 businesses were helped and 400 applied for the program on the last day of its trial. NADCO has been a consistent advocate for its renewal and extension.
“It’s rare to see the impact of policy in Washington so clearly in the marketplace – yet that’s exactly what we are finding this month. This is a very significant drop in commercial real estate and equipment loans from the SBA as debt-refinanced loans from the JOBS Act of 2010 are now exhausted,” said Beth Solomon, President & CEO of NADCO.
“While the initiative was originally enacted temporarily, it helped more than 2,700 small businesses unleash nearly $7 billion in capital to invest in their businesses that had been locked in their own property. Debt Refi needs to be reinstated to boost America’s fragile economic recovery.”
Legislation passed by the Senate Committee on Small Business and Entrepreneurship would reinstate the program permanently at no cost to the taxpayer.
“The SBA’s 504 Debt-Refinancing initiative was a bipartisan initiative that helped thousands of U.S. small business get better rates on long-term debt, allowing them to use the equity in their businesses to create jobs and grow,” said Debbie Partin, Director of REI Business Lending in Oklahoma and NADCO’s Vice Chair of Legislative Affairs.
“In some cases debt-refi saved companies tens of thousands of dollars per month that they used to sustain jobs, and improve and expand their businesses. In other cases, companies were able to get out of balloon loans and demand notes that threatened the very existence of their companies.”
Debt Refi’s success has not gone unnoticed. A bill that permanently extends Debt Refi passed out of the Senate Committee on Small Business and Entrepreneurship with bipartisan support.
“The August SBLR is more evidence of the impact of removing this critical opportunity from the marketplace. As rates continue to rise from their historic lows, small businesses should not only take advantage of the unique advantages of the SBA 504 loan, but also urge their elected leaders to support bipartisan, commonsense solutions like the CREED Act which would empower job creators in every Congressional District to invest in growing businesses,” Solomon added.