This subject is a bit removed from our usual estate planning, probate and Medicaid matters. Many of our readers are retired, but we also have professional advisors and CPA's on our distribution list. The occasion for our rambling into the business arena is the passage by the US Senate of HR 5297 Small Business Jobs and Credit Act.
One of the particular highlights of the new law, aimed at propping up small business and providing access to capital, is the expanded definition of a Small Business.
Media Attention on Small Businesses. Anyone reading the paper or watching TV is aware that all politicians are focused on helping "Small Business." We also know from media publicity that Small Business creates 70% of all new jobs. Over the past several months we have heard complaints that Small Business cannot get access to loans, because of the crisis in the financial sector.
This should change in the next few months. Professional advisors should be alert to the new opportunities for their small business clients. By customary definitions, many businesses would not qualify for SBA assistance because of a revenue cap of $6.0 million.
Now, in lieu of a $6.0 million revenue cap, the standard, as we understand the bill, will be tangible net worth of $15.0 million and two year average net income of $5.0 million or less.
We have read that approximately 90% of all companies in America will now qualify for SBA loan assistance. This can be a big deal, as explained below.
What Kind of Assistance Does SBA Give? SBA - Small Business Administration has typically arranged for government guarantees on loans made by banks to "small businesses." Limits on guaranteed loans to small businesses have been increased substantially:
1) General purpose working capital loans for existing or start-up small business, the 7(a) loan program, have been increased from $2.0 million to $5.0 million.
2) Express loans - turn around time 36 hours, have been increased from $350,000 to $1.0 million.
3) The second mortgage loan limit has been increased from $1.5 million to $5.0 million.
These are huge increases, some of which will expire December 31, 2010, unless Congress extends them.
Fee Reduction. The new law eliminates origination fees on all SBA loans through December 31, 2010. This is a huge saving for small businesses, as the up front fees have been a major deterrent to the use of SBA financing.
Increase in SBA Guarantee. While the percentage of SBA Guarantee may vary according to the size and amount of the loan, the former maximum 75% SBA Guarantee has now been increased to 90%. This reduction of risk for banks and other lenders should be a great incentive for them to make SBA loans.
Bottom Line. This advisory letter is not intended to be a thesis on SBA loan programs. This is an alert for all advisors that know business owners and entrepreneurs. If financing is a problem, the government is offering a new, much broader scope for relief. Supporting small business is a stated priority for both political parties!
Conclusion. Our firm is in contact with many active SBA lenders who are looking for business. Our business attorneys are skilled and experienced in expediting these matters. Any person you know who is interested in more facts, should call Doug Shepherd, Tom Pezzetti, or any of the attorneys listed below.
Donald A. Brandt, Joseph C. Fisher, Thomas R. Alward, Matthew D. Vermetten, Thomas A. Pezzetti, Jr., James R. Modrall III, Susan Jill Rice, Gary D. Popovits, H. Douglas Shepherd, Laura E. Garneau, David H. Rowe, Nicole R. Graf, Priscilla V. Hirt at (231) 941-9660
BRANDT, FISHER, ALWARD & PEZZETTI, P.C.
This newsletter is provided for informational purposes and should not be acted upon without professional advice.
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