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Popular Small Business Economic Recovery Programs Set To Expire In September

Written by Ken Gaebler
Published: 8/20/2012

Congressional deadlock may cause two successful SBA programs to expire in late September, further limiting funding options for many U.S. small business owners.

The deadlock in Washington is having a real world impact on the lives of many Americans -- and if Congress doesn't act soon, it could have a devastating effect on recovery funding programs for U.S. small business owners.

SBA Lending Programs at Risk

Unless Congress passes extensions, two SBA lending programs will expire in late September. The refinance provision of the SBA 504 loan program gives small businesses the ability to refinance commercial mortgages, securing longer loans terms and below-market fixed rates. The other program, the First Mortgage Lien Pooling (FMLP) program, allows lenders to re-sell portions of SBA 504 loans, which increases lenders' liquidity and capacity to offer new small business loans.

The SBA 504 refinance and FMLP were largely responsible for increases in the volume of SBA loans during 2011 and 2012. SBA data shows that SBA 504 refinance loans represented approximately 15 percent of all SBA 504 loans during Q1 2012 and 21 percent of all SBA loaned dollars. Currently, approximately 15 percent of all SBA loans are FMLP loans.

"These two threatened initiatives significantly expand the benefits of SBA 504 financing for small businesses in the U.S. at a time when our economy needs businesses to grow and create jobs," said Chris Hurn, CEO of Mercantile Capital Corporation.

Government-backed loans to small businesses are a primary source of capital for many entrepreneurs. Increased regulatory concerns have tightened the commercial credit market in recent years. Without access to SBA lending programs -- including the programs that are slated to expire -- many companies and small organizations would be forced to close their doors.

"The FMLP program has become the only viable financing source for assisted living facilities, daycares, auto repair shops, restaurants and hotels because conventional lenders generally won't finance these types of properties," said Hurn. "Dozens of small business owners we've worked with this year wouldn't have been able to get funding without one or both of these programs."

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