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*Amended on February 23, 2021 to reflect SBA’s Procedural Notice posted on February 16, 2021. Details constantly subject to change. For more information, visit the SBA’s website at www.sba.gov.
As things continue to rapidly evolve in commercial financing during COVID-19, one thing is for certain: small businesses need help more than ever. As it becomes more and more unlikely for a business to walk into their corner bank and secure a loan, private lenders and commercial loan brokers have assumed the role and are coming to the rescue – with the help of the SBA.
This week, the SBA announced its emergency enhancement plans to provide new stimulus for 2021 — and they’re coming in HOT and ready to help small business.
So, if you’re looking to acquire a business, start a franchise, purchase a building for your business, expand or even refinance – NOW is a better time than ever. Why?
That’s right. Unlike the SBA’s stimulus package from the last major recession (which also increased guarantee percentage and cancelled guarantee fees), the SBA has added in an extra bonus of paying THREE full months of principal and interest to the lender on the borrower’s behalf – up to $9,000 per month.
While we wait for the guidelines to officially come out, these are the details that we are hearing from the SBA on how this will actually work…*
For all new SBA loans approved after February 1, 2021, the SBA will make three payments of principal and interest on the loan, paid to the lender, on the borrower’s behalf. These payments are good for all amounts up to $9,000 per month. In addition, the borrower does not need to apply for this relief, as it will be automatically applied to for them, by the lender.
In addition to the three free payments, the SBA will also waive SBA Guarantee Fees on all new SBA 7(a), 504, and Micro-loans that are approved starting February 1, 2021. These SBA guarantee fees are paid by the borrower, and are usually around 2-3% of the guaranteed portion of the loan. For example, here are some common amount guarantee fees:
The SBA is also changing the guarantee percentage of its 7(a) loans. These guarantees provide insurance to the lender in case the borrower is unable to repay the loan. In such a case, the SBA would cover the loan payment amount to the lender, thus mitigating the lender’s risk in taking the loan.
While this has no real effect on the borrower, it has major implications for the lenders: it encourages them to fund loans that they wouldn’t have otherwise funded. (Thus, if you were on the cusp, now would be a good time to go back to your lender and try again!) Typically, this guarantee percentage is 75-85%, but thanks to the new guidelines, that guarantee percentage will go up to 90% (or even 100% on loans with commercial real estate!)
With all of these new bonuses, a new $5 million SBA loan will save approximately $135,000 in payments and fees! However, there is a deadline: to qualify, your loan must be approved before September 30, 2021. So borrowers — make sure to apply prior to August 2021, as we will surely see the system bottleneck as it comes to a close…
If you’re looking to purchase, grow or expand your business and require between $500,000 to $5 million, an SBA loan might be for you. SBA Loans cover these requirements:
This applies across most industries, even covering hospitality that has bounced back during the pandemic. Unfortunately, this leaves out specific businesses and property types such as gas stations, mobile home parks, and ground-up construction.
The SBA loan application and approval process has never been described as “quick and easy” (most SBA loans take about 30-90 days to close), but you can make the process easier for both you and the lender by having these documents prepared ahead of time:
And as always, when looking to obtain commercial financing, we advise that all borrowers and business owners keep their big-ticket purchases to a minimum! While a new house or fancy car might be selling at a price that you feel you can’t miss out on, you’ll really kick yourself if it ends up making you miss out on these killer loans!
Although traditionally, a business’s first instinct is to ask their local bank for a loan, that is no longer a viable option — especially for SBA loans. In order to obtain an SBA loan, you’ll want to apply for a loan with an SBA Preferred Lending Partner, or PLP. However, not all PLP’s fund the same SBA loans, and some only fund specific industries or commercial real estate property types. Your best move, to save time and find the best lender for your loan requirements, is to consult with a Commercial Loan Specialist who can help you examine several different lenders at once. These commercial loan specialists leverage their relationships with PLP’s and behave like a partner to you, the borrower — advocating for you from application to approval to close.
If you’re interested in applying for a new SBA loan today, we encourage you to reach out to our specialists at Commercial Capital Ltd., FL (ComCapFL) and find out how we can help you find the best options for you and your business.
There has been a major shift in the landscape of commercial and business lending as result of the recent economic shutdown due to COVID-19. Some of the effects on the economy are obvious, while others are not yet as clear.
On an individual level, our country is witnessing an unemployment crisis. We are seeing the highest unemployment rates since the Great Depression. While some expect to be out of work only temporarily, many will find their job loss to be permanent. While the real numbers are yet to be determined, it’s possible that as many as 20 million Americans will remain jobless in the near term, despite businesses reopening and inviting workers back. Some of the other resulting effects of this widespread unemployment will take months and possibly years before their full impact becomes apparent.
Meanwhile, businesses are facing unprecedented challenges. While many were hoping for a safety net from the CARES Act, most will soon close their doors. While these loans were intended to save small business, lax guidelines for borrowing caused most of the PPP and EIDL money to go to large business and corporations through carefully exploited loopholes. In good news, perhaps some small businesses will find other financing relief as a few private equity and bank-owned funds are getting back to agency and SBA loans. Although SBA loans have been available in both 7a and 504 programs, exposure and risk are now being considered even more carefully. Take SBA 504 loans for example: Currently, SBA 504 programs have become scarce and are no longer available under $1 million. Because of the effects of COVID-19, every lender is treating their due diligence requirements differently and being careful to measure the impact of the recent months on each individual business loan request.
In the commercial real estate markets, most banks and alternative lenders are being overly cautious. Many find themselves running behind from using remote workforces or from trying to keep up with deployment of the PPP loan program. In most cases, they’re prioritizing existing clients in the interest of protecting exposure and portfolios, rather than taking new clients and originating new loans.
In the commercial property space, the jury is still out on retail, office and mixed-use properties in terms of the predominant components of these property types. The least affected property types appear to be multifamily apartments and to a lesser degree, industrial properties. The CLO lenders, who utilize the credit market to originate loans, are sidelined; and unprecedented new rules are being written for exposure, leverage, and cash reserves. Most lenders are adjusting their LTV percentage, with very few going over 65% and virtually none of them doing cash-out or non-recourse loans. While there’s still plenty of money sidelined in private equity, CMBS has been slow to restart, and private equity funds that are top-heavy are carefully examining every risk, with many deals getting pushed to the side. These days, a multifamily commercial loan over $1 million is more likely to come through an agency-backed program like Freddie Mac than from a balance sheet loan.
While we don’t have a crystal ball, at ComCapFL, we do have decades of experience in changing markets. Our read on the current market is that we will continue to see very little aggressive lending from the banks who have grown more cautious steadily over the years, even before COVID-19. However, it will take many months before we start to get a real feel for the overall impact on the US and world economies. A good comparison to the current situation would be the Black Monday market crash in October of 1987, the largest one-day drop since the crash in 1929 that preceded the Great Depression: Whereas consumer sentiment returned to normal rather quickly around 1988, it wasn’t until October 1990 that the economy actually re-stabilized and we entered into an almost 10-year bull market.
Make no mistake about it, our country is definitely in a very volatile position with its rapidly changing landscape for commercial money. That’s why now, more than ever, it’s extremely important that you have a competent and experienced commercial financing professional to help guide you through the current market and lending climate. Going at it alone may prove to be extremely difficult for even the most seasoned investors and stabilized businesses.
At ComCapFL, we’re here to assist you in navigating through these turbulent waters and getting you through these tough times. Give us a call at (888) 959-1648 or email us at info@comcapfl.com to speak to a specialist about real solutions for your business or real estate investment financing.
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