Craig G. Francis

Good News for Commercial Real Estate Owners

Last year, as part of the Small Business Jobs Act, Congress authorized implementation of a program that would allow some owners of owner-occupied commercial real estate (CRE) to refinance with an SBA 504 loan. When that program began in February, 2011, only CRE with maturing mortgages or balloon payments due before December 31, 2012, was eligible for consideration. That is all about to change.

 
In a press release on Tuesday, March 29, the Small Business Administration announced that by April 6, with publication of the changes in the Federal Register, the program will accept CRE with  maturation or balloon dates beyond December 31, 2012. The goal is to provide small businesses with a way “ to secure more stable, long-term financing” in order to avoid potential foreclosures that would further damage the struggling economy. The money businesses save with lower financing rates could be used to cover day-to-day expenses, and could make the difference between survival and failure.

The program is not eligible to all small businesses. The CRE must be owner occupied with the debt  incurred less than two years before applying. In addition, the business must have been in existence more than two years and payments on the debt must be up to date for the past 12 months. Businesses can refinance up to 90% of appraised value or 100% of the outstanding loan, whichever is less, and money received through the program can only be used for expenses normally eligible through 504 loans.

The program will only run through September 27, 2012, or until all the money has been allocated. The Small Business Jobs Act authorized the SBA to approve up to $7.5 billion each year in 2011 and 2012, and expectations are that it will go quickly. You can read the complete press release here. If you are interested in applying and would like advice and guidance, you can contact me at 888-666-9722 and we can set up a time to discuss your business’ particular situation.

Craig G. Francis is the owner of Francis Financial and The SBA Loan Store. He has been a top producer of SBA Loans since 1981, and has worked with Dun & Bradstreet and Bank of Commerce. Craig Francis has the expertise to steer clients through the often confusing rules and regulations associated with SBA Loans, having helped over 2,000 businesses acquire over a billion dollars in loans. He can be contacted through CraigGFrancis.com, SBALoanStore.com, on LinkedIn, or at 888-666-9722.

Verdict is in: Recession hurt small business growth

 

Two recent articles, in the Wall Street Journal and the El Paso Times, are confirming what we have been saying for some time: tightening financing options caused a severe drag on small businesses and start ups during the Recession. Many businesses scaled back during the past few years, but those that were looking for money to expand or simply to survive had a tougher time getting any. Big lenders cut back the most, but smaller community banks also had their own difficulties to deal with.

Bob Coleman, editor of the Coleman Report, told Vic Kolenc of the El Paso Times (in “Lending world has changed for small businesses, writer warns”) that the combination of the Recession and stronger attention to regulations in the banking industry made it more difficult for small businesses to access funding. He pointed out that not only were small business loans were harder to get, the other traditional funding sources - personal and business credit and home equity - were cut back considerably. Coleman does see things easing up somewhat, but most banks are setting additional requirements for prospective borrowers to provide.

According to an article in the Wall Street Journal by Justin Lahart (“Recession Caused Sharp Decline in Start-Ups”), data from the U.S. Census Bureau shows that start up businesses took the greatest hit ever during a recession. From April, 2008, through March, 2009, new business starts were down 17.3% compared to the previous 12-month period. It was also the fewest start ups since records on new businesses began to be kept in 1977. This is also reflected in the fact that there were some 700,000 fewer people employed by businesses less than a year old in March, 2009, as there were in March, 2008. Anyone looking for one reason our unemployment numbers continue to be so bad need look no further than this.

The good news is that, as Bob Coleman pointed out, banks are beginning to look at lending to small businesses again. After all, lending money is their business and they have to get back into that in order to survive - they cannot expect to be bailed out again so soon. The caveat is that lenders are looking much more closely at the information borrowers are providing. Balance sheets and financial statements are not enough; banks want to know they are dealing with someone who knows how to run a successful business. Working with someone who has experience in the lending field can go a long way toward setting up for a successful loan application. With over three decades in the industry, I have worked with hundreds of businesses and scores of lenders and can help with those small details that make a difference. Sign up for two complementary reports, and I will contact you to set up a time that we can discuss your business funding needs. Now is the time to begin moving forward with your business plans.

Craig G. Francis is the owner of Francis Financial and The SBA Loan Store. He has been a top producer of SBA Loans since 1981, and has worked with Dun & Bradstreet and Bank of Commerce. Craig Francis has the expertise to steer clients through the often confusing rules and regulations associated with SBA Loans, having helped over 2,000 businesses acquire over a billion dollars in loans. He can be contacted through CraigGFrancis.com, SBALoanStore.com, on LinkedIn, or at 888-666-9722.

 

Treasury Conference Looks at Lending Issues

Tuesday the Treasury Department hosted a conference with much of the focus on business funding issues. U.S. Treasury Secretary Timothy Geithner and Small Business Administration Administrator Karen Mills both spoke at the meeting that included entrepreneurs, venture capitalists, and government administrators. In a replay of what has been said many times already, both Geithner and Mills touched on the difficulties small businesses have had accessing funding since the beginning of the Recession.

Two articles in the Wall Street Journal touched on different aspects of the conference. In “Opinions Abound at Capital-Access Forum,” author Emily Maltby relates the discussion on how to improve funding for so-called “gazelle” firms (“those top-performing companies that take off rapidly and provide jobs”). One problem, as detailed by representatives of smaller venture capital companies, is the tendency for institutional investors to go with larger VC firms, when they invest at all. The challenge, according to Mills, is finding ways to encourage these companies to get “back in the game.”

Jeffrey Sparschott’s article (“Small Businesses Need Funds to Compete -Geithner”) touches on this same issue as he reports on Geithner’s concern that "The financial crisis caused a great deal of damage to the capacity of innovators to access capital.” It is important, he says, that “innovative companies” have access to the funding they need in order to help deal with the lingering economic malaise.

One important element that is brought up in the Maltby article is the concern voiced by a number of participants on government involvement in getting lending back on track. From over-regulation to unintended consequences, government involvement in business is always troubling. Several participants specifically pointed out problems with SEC regulations being “outdated” in light of recent developments in online funding platforms. Others called for “solid and more-predictable government policy” from Washington.

Some of what the Treasury meeting brought up will be beneficial, if businesses are allowed to put ideas into practice with limited government involvement. However, seeing that this was sponsored by the Treasury, it’s likely that Washington will have its fingers in as much as possible. And we have seen what happens when government becomes involved. My concern is that with taxes, regulations, health costs, lack of capital and an anti business environment in the White House as mill stones around the neck of real job-creating  business people, these “gazelles” will be about effective as the 'green jobs' and 'clean energy jobs' in pulling us our of this mire.

For now, the best plan for business owners and new entrepreneurs is to work with someone who can help them get all of the details in order before applying for funding. The requirements the banks and other lenders have put in place since 2008 can be onerous, but they are not impossible to work through. I have been in the loan industry for over three decades and have worked with all types of lenders. You can sign up for two complementary reports and I will contact you to set up a time to discuss your business needs.

Craig G. Francis is the owner of Francis Financial and The SBA Loan Store. He has been a top producer of SBA Loans since 1981, and has worked with Dun & Bradstreet and Bank of Commerce. Craig Francis has the expertise to steer clients through the often confusing rules and regulations associated with SBA Loans, having helped over 2,000 businesses acquire over a billion dollars in loans. He can be contacted through CraigGFrancis.com, SBALoanStore.com, on LinkedIn, or at 888-666-9722.

Business Lending Continues to Lag

The results are in, and small businesses are not out of the woods when it comes to funding. In spite of some extraordinary additions to SBA funding programs in 2010, reports from a number of sources indicate that overall lending to small businesses was down over 6% between June, 2009, and June, 2010. This is even taking into account the $963 million in additional appropriations provided to the SBA for enhancements in the 7 (a) and 504 loan programs. And the news is not getting much better.

In an article in CNNMoney.com, writer Catherine Clifford points out that this $43 billion drop is just part of an overall $53 billion lending decline from the high of over $700 billion in June, 2008. While some of this is a result of small businesses scaling back or foregoing previously planned expansions, many observers worry that deserving businesses were denied loans simply because banks were afraid to lend. While lending also dropped to large businesses, these entities were better able to weather the storm because of access to other forms of funding, including stocks or outside investors. Clifford argues that, in spite of making “a big show of studying the small business credit crunch,” the Federal Reserve is still off the mark when it comes to dealing with the situation. While the $30 billion fund the government set up to help smaller banks make loans to small businesses, the fact remains that the majority of loans still come from banks with assets over $10 billion.

So what are these larger banks doing? John Tozzi, in an article in Bloomberg Businessweek, reports that three of the biggest lenders, Bank of America, JP Morgan Chase, and Wells Fargo, all reported increased lending to “small” businesses in 2010. These three were under pressure from the White House to increase business lending, in part because of the huge bailouts they had taken earlier, and had made pledges to do so. The numbers are a bit misleading, to an extent, particularly in the definition of “small business” each bank uses. As an example, B of A lumps together all businesses with $50 million in revenue in its numbers, and most of their lending increase went to those in the $20-$50 million range.

An even more recent article in Reuters indicates that small business lending has increased, but that it is still far below pre-recession levels. The article by writer Ann Saphir reviews the just-released Thomson Reuters/PayNet Small Business Lending Index which shows that lending in January was up 14% from January 2010, but did drop compared to December 2010. This could be in part because the extension of the SBA loan sweeteners ended on December 31. The article also predicts that it could be up to two years before small business borrowing recovers.

Where does that leave small business owners? First, realize that banks are still lending money to businesses that fit into their criteria. After all, banks are in the business of lending money, they have just become extremely careful of whom they lend it to. Your best move, if you are looking for money to support or grow your business, is to speak to an expert who can give you the straight talk on your situation and then help you set yourself up for the best chances with the lenders. You can get a start by signing up for two complementary reports from my website SBALoanStore.com; I will contact you and we can set up a time to discuss your business’ needs. You can also find other great information there.

Craig G. Francis is the owner of Francis Financial and The SBA Loan Store. He has been a top producer of SBA Loans since 1981, and has worked with Dun & Bradstreet and Bank of Commerce. Craig Francis has the expertise to steer clients through the often confusing rules and regulations associated with SBA Loans, having helped over 2,000 businesses acquire over a billion dollars in loans. He can be contacted through CraigGFrancis.com, SBALoanStore.com, on LinkedIn, or at 888-666-9722.