SBA Lender Says Congressional Reforms Misguided, Proposes Simple Changes for Major Economic Stimulus

Feb. 28, 2008 - PRLog -- ORLANDO, Fla.---- The toll that the tightening credit market is taking on small businesses’ access to capital has spurred bills in the U.S. Congress aimed at curbing the fees and increasing the maximum size of Small Business Administration loans under the agency’s most popular lending program.  The president and CEO of Mercantile Commercial Capital, one of the country’s largest SBA lenders, Chris Hurn is writing to congressional leaders and the SBA to indicate that the proposed changes are misguided and suggest reforms for the SBA 504 loan program that he believes would make a significant positive impact during the current economic downturn.  

Specifically, Hurn indicates that the current bills before the U.S. Congress (H.R. 1332, S. 1256 and S. 2612) would exacerbate the existing problem of competition between the SBA’s two primary lending programs for small businesses.  As it currently stands, private sector banks and lenders prefer to offer SBA 7(a) program loans over the agency’s 504 program loans because they can earn larger profits and fees with the 7(a).  The current bills would make this profit disparity between the two loan programs even greater, so lenders will be less likely to recommend the 504 over the 7(a) even for commercial real estate acquisitions, for which the 504 was created to offer borrowers significantly better terms and rates than the 7(a).

“I’m writing Sen. John Kerry and the other congressional leaders behind the current bills to recommend a different set of reforms focusing on eliminating the competition between the SBA’s two largest lending programs,” said Hurn.  “These reforms would entail making the 504 loan program the exclusive option for commercial real estate loans from the agency and enabling 504 loans to be offered for the refinancing of commercial property loans.”

According to Hurn, the 504 loan program is the most efficient job-creation program that the SBA offers, but it remains underutilized.  

Hurn indicates that the reforms he proposes would boost the U.S. economy by helping small businesses to grow and add jobs without the creation of new programs or allocation of additional federal funds.  He also believes that the changes would complement the recently enacted small business economic stimulus measures that allow investments in tangible property by businesses to be more speedily depreciated.  

“With the declines in the housing market, small-business owners are now considering investments in commercial property for their businesses as opposed to risky investments in residential real estate,” said Hurn.  “The changes that I suggest for the 504 loan program will work in conjunction with the recent tax breaks to create incentives for small businesses to acquire or develop their own facilities.”

Hurn also points out that allowing businesses to refinance their existing commercial property loan with a 504 loan would give thousands of businesses a new option that could significantly lower their monthly property payment, which would enable many to hire more employees or invest in growing their enterprise.

The 504 loan program is the primary economic-development and job-creation program of the SBA.  The portion of each 504 loan funded by the government represents the least expensive financing option that is available for businesses.  

Recently named to the Inc. 500 list of America’s Fastest Growing Companies, Mercantile Commercial Capital has been called the “Fastest Growing Commercial Lender in America,” the “most unique and entrepreneurial bankers around,” and the “fun bankers.” From its start in 2003, MCC has focused on providing SBA 504 loans for small business owners to acquire or enhance their own facilities.  The company was named “Best Place to Work” by the Orlando Business Journal in 2005, 2006 and 2007.

Additional information on MCC and its loan offerings is available at http://www.504Experts.com or by calling (866) 622-4504 (toll free).

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