SBA Fee Waivers Extended

[Alan Bussey]

The Recovery Act (the 'Stimulus Act'), which became effective in February 2009, in part increased the SBA loan guarantee percentage and instituted SBA fee waivers. The 90% guarantee, up from the usual 75%, and the fee waivers have tremendously increased small business borrowing under the SBA program when compared to the disastrous 2008, up more than 80%. (Loan volume is still well off the pace of 2007.)

For refinancing, buying, or building, the fee waivers often save car wash loan applicants $20,000 or more. That's real dollars saved. This is also dollars saved compared to non-SBA loans that have an origination fee. Since the SBA guarantee fee and other fees are customarily financed into the loan, the fee waivers also lower the monthly payments.

For SBA the Recovery Act officially ended on February 28, 2010, but business loan applicants used all of the appropriation by February 22nd. The higher guarantee and the fee waivers ended.

On March 2, 2010 Congress passed and President Obama signed the Temporary Extension Act of 2010. The law provides an additional $60 million for the higher SBA guarantee and the loan fee waivers.

This new extension lasts only until March 28th or until the appropriation runs out again, whichever comes first. For new loans submitted to SBA after March 28th the guarantee drops back to the normal 75%. The fee waivers officially continue until 9/30/2010, but the money probably won’t last until even the end of this month (March 2010).

If you plan to take advantage of the higher guarantee and the SBA fee waivers, you need to have your application submitted to the bank by about March 15th. The key to getting the higher guarantee and the fee waivers is submission of the application to SBA. Submission to SBA can happen within just a few days after the bank has approved your loan.

 

[diycarwash]

Alan,
I would be interested in refinancing my 4 car wash loans to one fixed rate loan. Would this program work for me? If so, what type of fixed rates loans are they offering.
Thanks,
David

 

[Alan Bussey]

Just a side comment in response to a question that I received on this post.... The 90% guarantee is granted to the lender. It really is a guarantee of 90% of the LOSS that a lender might experience upon sale of the collateral. The borrower has to guarantee the entire LOAN, not just the possible loss. The guarantee has nothing to do with the down payment: Normally, for someone new to the car wash industry the down payment is 20%. It can be perhaps 15% for someone already in the industry as an owner/operator of similar car wash. The bank or finance company can require a larger down payment if they feel the need to do that and if the applicant (you) agree to it.

Quick example: Let's say that someone owes the bank $800,000 on a SBA-guaranteed loan and defaults. The bank forecloses and sells the property for $500,000. SBA cuts a check to the bank for $270,000, which is 90% of the loss. Normally the guarantee is 75%. So, when the Recovery Act really does end and is not extended, the amount paid by SBA to the bank would be the usual $225,000. It's easy to see why banks are much more willing to loan under the SBA program with a 90% guarantee, versus 75%. Many banks sell the entire 75% or 90% into the secondary market and they can collect a respectable premium for doing so. The lenders have always been required to hold at least 10% of the loan balance.