SBA Opens Up Refinancing, Questions from Experts
by Christina Lee on July 1st, 2009
The latest initiative from the Small Business Administration and President Obama’s stimulus plan has experts wondering whether changes meant to help small businesses refinance will be beneficial at this time.
The administration’s Certified Development Company (504) lending program traditionally provides long-term, fixed-rate financing for assets like real estate, heavy machinery or other improvements. But as of last Wednesday, it now permanently allows small business owners to refinance such debt, as long as it is used for expansion purposes.
“This is one more piece of the Recovery Act that is going to have a direct impact and put more money in the hands of small business owners just when they need it most,” said Karen Gordon Mills, head of the Small Business Administration, in a statement.
But the timing of such changes is a bit off, according to experts and analysts of 504 lending programs. They say that few businesses can currently afford to expand, to leave such good intentions unused.
According to Scott Shane, professor of entrepreneurial studies at Case Western Reserve University, few small business owners may also feel up to the task. In May 2009, just 5 percent of business owners felt that the following three months would be “a good time to expand.”
This is a drop of 11 percent from nearly two years ago, according to data Shane cumulated from the National Federation of Independent Business. And while positive feelings unexpectedly spiked last September, overall trends speak volumes about the confidence level of such business owners.
“Small business owners’ views of the expansion-potential of the economy may have turned the corner, but we have a long way to go to get back to the point where a lot of small business owners think it’s a good time to expand,” Shane wrote Monday for the New York Times.
As president of Mercantile Capital Corporation – a conventional, for-profit 504 lender – Christopher Hern suggests fully lifting any restriction on refinancing, to really stimulate small business lending. Bob Coleman, publisher of Small Business Administration newsletter Coleman Report, agrees.
“This is another program stymied by too much regulation and will not deliver the intended stimulus desired by Congress and the Administration,” he commented to the New York Times.
Small business owners – will you take advantage of the new 504 lending program anytime soon? Why or why not?