As the SBA recently marked how the Small Business Jobs Acts of2010 has helped it approve more than $10.3 billion in loanguarantees since the legislation was signed back in September,credit unions and other lenders could reap some unexpectedbenefits.

The Small Business Jobs Act included an array of provisionsaimed at helping small businesses gain access to capital, competefor federal contracting opportunities, expand exportingopportunities and obtain other assistance to help them grow andcreate jobs.

“The new bill enables banks and credit unions to make largerSBA-backed loans to larger businesses,” said Barbara Morrison, CEOof TMC Development, a certified development company in SanFrancisco. “For the first time ever, middle-market bankers haveaccess to the lower rates and attractive terms of SBA financing tohelp small and mid-size companies grow their businesses.”

Morrison said TMC had provided more than $5.7 billion infinancing to more than 3,600 businesses in California and Nevada.She serves on the Federal Reserve Bank's small business taskforce.

Many business owners purchased a property for their businessesutilizing a loan from a commercial lender, Morrison said. Typicallythese loans were 75% loan to value, meaning that the borrower'sdown payment was 25% of the purchase price and the terms of theseloans were often five years. Today, many of these business ownersface the prospect of refinancing a property that has decreased invalue, she said.

To illustrate, Morrison said a property purchased five years agofor $1 million may have a loan of $750,000 that is now due. Theproblem for the property owner is that the amount that the lendercan refinance is less than the amount that is currently owed. Ifthe property's value has decreased and is valued at $750,000 today,the lender cannot refinance a $750,000 loan. Morrison said mostlikely the lender would be able to offer a loan of 75% of thecurrent value or only $562,500, which would be a short fall of$187,500.

“The new SBA 504 refinancing program would provide the businessowner with the ability to refinance the entire $750,000,” Morrisonsaid. “The exact details aren't available yet as SBA has notwritten the new SBA regulations. We hope to have them before theend of the first quarter this year.”

Many credit unions offer SBA 504 loans. They are structured withtwo loans-a first mortgage from a conventional lender and a secondmortgage from a CDC. The breakdown is generally 50% from thelender, 40% from the CDC/SBA and 10% from the borrower.

Through new legislation, SBA business-size standards and loanlimits have increased. Morrison said now, virtually any privatelyheld company can be eligible for SBA financing, and they canfinance commercial real estate purchases in excess of $20million.

“With more banks and credit unions offering the SBA 504 loanprogram, we might see a boost in commercial real estate,” Morrisonsaid. “This program helps save businesses from going intoforeclosure, and is an opportunity for making a potentiallyprofitable loan to businesses that had previously been consideredtoo big.”

The SBA program also offers lenders a way to avoid additionalloan defaults, which could result if a client was unable to raisecash for refinancing, she added.