New First-Mortgage Loan Poolers Will Jump-Start Secondary Market for SBA 504 Loans, Make Credit More Available

Today, the U.S. Small Business Administration announced the first nine loan pool originators authorized by the agency to assemble and sell pools of 504 program first-mortgage loans -- a major step to jump-starting a secondary market that should make fixed-asset financing more widely available for small businesses.

The new program was approved under the American Recovery and Reinvestment Act.

Prior to the recent disruption in the credit market, a private secondary market for these loans existed, but has not revived as the economy has started to rebound. SBA expects this new program to breathe new life into that secondary market and improve access to credit for small businesses by providing a resource that can help boost liquidity to small-business lenders.

"With the resources provided in the Recovery Act, we have engineered a turnaround in its SBA lending, putting nearly $30 billion in the hands of small businesses across the country," said SBA Administrator Karen Mills [pictured]. "This added support now to relaunch the 504 first-mortgage secondary market builds on that success, and will help leverage even more capital for small businesses to support their growth and create new jobs."

Under the program, the SBA will provide a government guarantee on pools of portions of eligible 504 first-mortgage loans assembled by approved pool originators to be sold to third-party investors. Lenders will retain at least 15 percent of each individual loan, pool originators will assume five percent of the risk, and the SBA will guarantee the remaining 80 percent.

Typically, a 504 project includes three elements:

1] A loan [or first mortgage] secured with a senior lien from a private-sector lender, covering up to 50 percent of the project cost;

2] A second mortgage secured with a junior lien from a Certified Development Company [backed by a 100 percent SBA-guaranteed debenture], covering up to 40 percent of the cost; and

3] A contribution of at least 10 percent equity from the small-business borrower.

Under the new program, portions of the senior liens are pooled by pool originators and sold to investors in the secondary market. To be eligible to be included in a pool, the first mortgage must be associated with a 504 loan disbursed on or after Feb. 17, 2009. The program will be in place until Feb. 16, 2011 -- or until $3 billion in new pools are created, whichever occurs first.

The pool originators approved thus far are:

* Bank of America, N. A. of New York, N.Y.;

* Cantor Fitzgerald & Co. of New York, N.Y.;

* Citizens Bank of Elizabethton, Tenn.;

* Coastal Securities, Inc. of Houston, Tex.;

* Community South Bank of Knoxville, Tenn.;

* Fidelity Bank of Covington, Ga.;

* Meadows Bank of Las Vegas, Nev.;

* Morgan Stanley Bank, N.A. of Salt Lake City, Utah; and

* Voyager Bank of Eden Prairie, Minn.

For additional information on the pool originators, visit: http://bit.ly/SecondaryMarket.

The list will be updated regularly as new originators are approved.

For more information about all of the SBA’s programs for small businesses, visit the SBA’s website at http://www.sba.gov/.

SOURCE: U.S. Small Business Administration
____________________

Download Intuit QuickBooks Pro 2010 Now! Save 20% + Free Shipping on the Most Popular Version of America's #1 Small Business Financial Software. [affiliate link]

House Passes Small-Business Capital Bill; Initiative Would Reinvigorate Investment in Small Businesses

Yesterday, the U.S. House of Representatives passed the Small Business Lending Fund Act of 2010, H.R. 5297, by a vote of 241-182. The legislation will aid small businesses in securing capital through new community bank incentives, support for state lending initiatives, and by opening venture-capital markets to small businesses.

"Today, under the leadership of Speaker Pelosi, Majority Leader Hoyer, Chairman Frank, Chairman Levin and Chairwoman Velázquez, the House of Representatives took strong action to help continue moving our nation's economic recovery forward," declared U.S. Treasury Secretary Tim Geithner. "At a time when too many small businesses are struggling to find access to the credit they need to hire and expand, this legislation will help ensure that Main Street entrepreneurs are better positioned to create new jobs and invest in their local communities."

The legislation passed by the House includes two key lending initiatives put forward by the Administration:

1] A Small Business Lending Fund that will provide small banks with capital and incentives to extend more credit; and

2] A State Small Business Credit Initiative to support innovative state small business programs -- many of which have been threatened by budget shortfalls.

"The lending initiatives passed today, along with the elimination of capital-gains taxes on small business investments approved by the House earlier this week, will help make certain that small businesses can play a critical role in building and sustaining our nation's economic recovery," Geithner added. "The Administration urges the Senate to take swift action on a package of measures to support small businesses, and looks forward to working closely with Congress as they move to finalize this legislation."

Rep. Nydia M. Velázquez [D-N.Y., pictured], chairwoman of the House Committee on Small Business, was pleased by yesterday's development. "As our most prolific job creators, small businesses will be central to the recovery of the U.S. economy," she said. "However, for entrepreneurs to expand and create jobs, they need access to financing. The measure we approved will make both credit and equity capital available for small firms."

While the legislation would establish a new $30 billion lending fund for community banks -- which proponents say would provide $300 billion in lending to entrepreneurs -- key changes were made during debate of the bill to ensure Main Street businesses benefit from the legislation:

* Rep. Glenn Nye [D-Va.] authored safeguards in the bill that will require banks to substantially boost their small-business lending to qualify for funds; and

* To further assist small firms, language prepared by Rep. Kurt Schrader [D-Ore.] would establish a new borrower assistance program, providing additional funds to small businesses who take out loans. The funds can be used at the entrepreneur's discretion to reduce their interest rates, defer their loan or cover monthly payments.

"Since the onset of the financial crisis, much has been done to shore up our nation's banks, but entrepreneurs' needs have gone unmet," Velázquez said. "These amendments will make sure that small businesses benefit from the current proposal, and I thank Mr. Nye and Mr. Schrader for offering them."

With the capital markets evolving, small businesses are increasingly looking beyond debt financing to equity capital to meet their financing needs. While entrepreneurs have traditionally used assets like real estate to secure loans, more and more business owners today seek financing based on their strengths; e.g., scientific expertise, research technologies, and potential for commercialization. For these firms, investment capital is a better financing solution.

To account for these economic changes, the legislation contains provisions aimed at reinvigorating investment in small start-ups. By establishing a new Small Business Early-Stage Investment Program, funds from the SBA will be paired with private capital to invest in small start-ups.

"In a world where revolutionary new products are conceived in dorm rooms and companies are born in garages, we need new ways of meeting businesses' capital needs," Velázquez noted. "The Small Business Early-Stage Investment Program recognizes this fundamental shift, taking steps to meet the capital needs of new businesses and helping them create jobs."

GoodBiz113's Take
This critical legislation is just the stimulus that U.S. small businesses need in order expand and create even more jobs for our nation's economic recovery. Kudos to Rep. Velázquez and her colleagues for propelling such far-reaching policy.

SOURCES: Community Development Venture Capital Alliance [CDVCA], Library of Congress, OpenCongress, U.S. Department of the Treasury, U.S. House Committee on Small Business, The White House
____________________

Get 20% Off QuickBooks Pro Small Business Accounting Software + Free Shipping + Free Learning CD. [affiliate link]

Verbatim: Influencers on Sotomayor, Small-Biz Lending, Broadband, New Native American Leadership, National Cybersecurity, Net Neutrality

As often as possible, GoodBiz113 presents diverse perspectives on small business and entrepreneurship from those who help shape small-business policies and practices, as well as those who report on small-biz-related developments. Here's what some folks said last week...

"...Generally speaking, Sotomayor is also considered pretty moderate, at least when it comes to other issues businesses care about, such as limiting class action lawsuits and pre-empting state laws with federal laws, several attorneys said. She has ruled for investors and companies in many different types of cases..." -- CNNMoney.com senior writer Jennifer Liberto, comparing U.S. Supreme Court nominee Sonia Sotomayor [pictured] to outgoing Justice David Souter. [May 26, "Sotomayor: Important Business Awaits," CNNMoney.com]

* * *

"In the current financial climate, it’s especially critical for small firms to know which banks and financial institutions have been the most likely to make small and microbusiness loans." -- SBA Office of Advocacy economist Victoria Williams, upon release of a study that ranks banks on small-business lending and provides hints about current financial trends.

According to the latest edition of the Office of Advocacy’s annual study of lending to small firms, Williams and co-author Charles Ou, a senior economist, found that the growth of small and microbusiness lending remained positive during the first half of 2008, although the expansion was slower than in the previous year. Their new report, "Small Business and Micro Business Lending in the United States for Data Years 2007-2008," gives a detailed account of small-business lending overall, plus state-by-state totals and totals for individual lenders. The full study, including expanded state-by-state tables, is available online at: http://tinyurl.com/n2okmh.

The U.S. Small Business Administration's Office of Advocacy, the "small-business watchdog" of the federal government, examines the role and status of small business in the economy and independently represents the views of small business to federal agencies, Congress, and the President. It is the source for small-business statistics presented in user-friendly formats, and funds research into small-business issues. [May 26, SBA Office of Advocacy]

* * *

"Ensuring that every American has access to broadband services is an important policy goal for the new Administration. With the passage of the American Recovery and Reinvestment Act of 2009, Congress and the Administration directed a number of federal agencies, including the Federal Communications Commission [FCC], to work toward this goal...

"Because small businesses are the heart of the American economy, they are critical to driving an economic recovery. However, access to modern technologies, including broadband, is critical to allow small businesses to grow. At the same time, small broadband providers will supply the competition and innovation necessary to expand advanced telecommunications services to all Americans. The Office of Advocacy will continue to play a leading role in ensuring that the needs of all small businesses are represented in the federal government throughout this process." -- Shawne McGibbon, acting chief counsel for SBA's Office of Advocacy, reporting that the FCC has launched a 13-month effort to develop a national broadband strategy to be presented to Congress by Feb. 17, 2010 [May 27, "Got Broadband? A National Broadband Strategy for Small Business," The Small Business Advocate]

* * *

“The SBA’s plan to offer floor-plan loans to America’s dealerships will help small businesses stay open in this uncertain economy... These loans will enable dealerships to maintain their inventory and save jobs. The provisions that the Small Business and Entrepreneurship Committee secured in the Recovery Act will also make floor-plan financing more affordable by eliminating borrower fees on the loans. This is another critical step toward increasing access to capital for America’s small businesses.” -- Sens. Mary Landrieu [D-La.] and Olympia Snowe [R-Maine], chair and ranking member, respectively, of the U.S. Senate Committee on Small Business and Entrepreneurship, commenting on the SBA's announcement that the agency will waive its floor-plan lending prohibition that is currently part of the 7[a] loan guarantee program.

The policy change will allow the SBA to guarantee up to 75 percent of floor-plan loans to dealerships to purchase cars, RVs, manufactured homes, boats and motorcycles. Floor-plan loans will be available for a minimum of $500,000 up to the $2 million allowable under the 7[a] program, and have a maximum repayment term of five years.

Floor-plan financing is a line of credit that allows dealers to borrow against their inventory, and then repay that debt as they sell their inventory or borrow against the line of credit again to add new inventory. Under the new program, the SBA will provide loan guarantees for lines of credit through its 7[a] program. These loans will be made through SBA lenders only for titled inventory. The pilot program will begin July 1 and will be available through Sept. 30, 2010, at which time the SBA will make the determination of whether or not to extend the program. [May 28, U.S. Senate Committee on Small Business and Entrepreneurship]

* * *

“I am pleased to have Clara Pratte joining our team at the SBA in this vital post... Clara’s background and experience will be an asset as we strengthen our efforts at the SBA to support the growth and development of small businesses and the economic opportunities they provide for Native Americans.” -- SBA Administrator Karen G. Mills announcing the appointment of Clara Pratte as national director for the agency’s Office of Native American Affairs.

As national director, Pratte will help to ensure that American Indians, Native Alaskans and Native Hawaiians seeking to create, develop and expand small businesses have full access to the necessary tools available through the SBA’s entrepreneurial development, lending and procurement programs. [May 29, U.S. Small Business Administration]

* * *

"[The President] committed to protect the Internet from those who would sacrifice the openness and freedom of the Internet for their own parochial interests when he said he 'remained firmly committed to net neutrality'... This makes sense in an announcement on the nation’s cyber infrastructure, because having Internet traffic content neutral is what everyone -- from the small-business owners to venture capitalists Obama mentioned in his speech -- rely on daily to do their jobs.” -- Ed Black, president of the Computer & Communications Industry Association, after President Barack Obama announced that he will soon name a national cybersecurity coordinator to protect America's communications and information infrastructure, and that the government is going to start treating the nation's digital infrastructure, broadband networks and computers as strategic national assets that should be "open and free." [May 29, "Obama Committed to Network Neutrality," Broadcasting & Cable]

SOURCES: Broadcasting & Cable, CNNMoney.com, The Small Business Advocate, U.S. Senate Committee on Small Business and Entrepreneurship, U.S. Small Business Administration, The White House [photo]
____________________

Norton 360 V. 3 -- 10 User Pack: Comprehensive, Automated Protection for All of Your Business's Online Activities. Click Here.

Franken Demands Immediate Congressional Hearings re Banks' Abuse of $700 Billion Bailout

Minnesota DFL candidate Al Franken -- the only U.S. Senate candidate who opposed the $700 billion Wall Street bailout -- today called for immediate hearings in light of reports indicating that banks may not be using those funds to unfreeze credit markets but, rather, for other purposes -- with the encouragement of the Treasury Department.

"Washington sprung into immediate action when Wall Street was in trouble, but there's been no help for struggling homeowners on Main Street and no solutions for middle-class families and small businesses hurt by the failed economic policies of the last eight years," said Franken. "And now we find that the $700 billion bailout is being used not to solve the problem, but to handpick winners and losers on Wall Street. That's an outrage.

"Taxpayer dollars should be helping taxpayers, not going to pad the bottom lines of the Wall Street bankers whose bad bets got us into this mess. This is exactly why we should never have passed this bill without proper accountability. And it's time for Congress to take action."

Earlier this month, the Bush administration announced that it would use bailout funds to inject capital directly into banks. They claimed that this would allow credit to start flowing again as banks lent that money to other entities. But recent reports indicate that, instead, the banks receiving these funds are using them to buy up other, smaller banks. And the Treasury Department, according to a column by New York Times financial columnist Joe Nocera, is encouraging the practice.

Meanwhile, Wall Street financial institutions like Morgan Stanley and Merrill Lynch continue to pay out billions in bonuses, despite receiving bailout funds.

This morning, during his statewide "For The Middle Class, For A Change" bus tour, Franken stopped at Bouquets by Carolyn, a small business located in St. Paul, Minn. There, he called for:
* Immediate hearings into potential abuses of the $700 billion bailout by Wall Street banks
* Straight answers from the Bush administration on its real plans for these taxpayer dollars
* An administration guarantee that banks receiving bailout funds will use them to lend
* A revocation of U.S. Treasury Department Secretary Henry Paulson's authority to implement the bailout if he cannot explain how his plan is serving taxpayers

In an editorial today, the New York Times wrote, "Shortly after the bailout was enacted, The Times's Mark Landler reported that Treasury officials also wanted to steer the bailout billions to banks that would use the money to buy up other banks. Now, lo and behold, with $250 billion in bailout funds committed to dozens of large and regional banks, it turns out that many of the recipients of this investment from taxpayers are not all that interested in making loans. And it appears that Mr. Paulson is not so bothered by their reluctance."

Case in point: Merrill Lynch. Two days ago, Bloomberg reported that, while Merrill Lynch is laying off employees, the financial institution is paying out billions in bonuses. According to Bloomberg, "Five straight quarters of losses and a 70 percent slide in its stock this year haven't stopped Merrill Lynch & Co. from allocating about $6.7 billion to pay bonuses ... The money Merrill has set aside for bonuses equates to an average $110,000 for each of its 60,900 people, up from $108,000 a year ago because more than 3,000 jobs have been cut."

Apparently, Merrill Lynch isn't the only bailout recipient that's utilizing taxpayer funds to reward its employees. Bloomberg also reported that Morgan Stanley and Lehman are both setting aside billions for bonus payments. According to Bloomberg, "Even some employees at Lehman Brothers Holdings Inc., which declared the biggest bankruptcy in U.S. history last month, will get the same bonus they received a year ago ... Morgan Stanley, the second-biggest securities firm until it also converted to a bank, has $6.44 billion for bonuses, or $138,700 per person, down 20 percent from last year."

GoodBiz113's take: Al Franken is right: Congressional oversight is needed, post-haste, to hold the Wall Street bailout recipients accountable for seeing that taxpayer funds are used to help fuel America's economy [e.g., small businesses, homeowners, working families], as intended -- not to lavishly reward their own fat-cat executives and employees.

SOURCES: Al Franken for U.S. Senate, Bloomberg, New York Times
____________________

Not sure where your polling place is? At VoteForChange.com, you can find out exactly where to vote and get crucial voting information.