Small Business and SBA 504 News You NEED to Know | March 31, 2015

In an effort to reach more Millennials looking to launch their own businesses, the SBA (@SBAgov) and Kauffman Founders School (@KauffmanFS) will be hosting a special chat on Twitter to discuss the tools, resources, and opportunities available to entrepreneurs. You can follow along and see what’s being discussed or participate in the chat by following the hashtag #MillennialTreps on Twitter.

Banks are looking at the latest Basel III rulings and specifically worrisome are the new rules for high volatility commercial real estate (HVCRE). Steven M. Regan who is with the firm ReedSmith a business law firm blogged that the HVCRE regulations are defined as a “credit facility that finances the acquisition, development or construction (ADC) of real property.” Sounding suspiciously like an SBA 504 loan program, this has raised the antennas of lenders in that marketplace wondering how this might affect them. Since HVCRE loans are weighted higher by regulators when accounting for how much capital a bank needs in reserve to survive an economic downturn, these institutions obviously want a clear definition of which loans will come under this umbrella. Specifically, will SBA 504 loans be categorized as HVCRE? Regan argues that since under Basel III, ADC loans that qualify as community development investments are exempt from HVCRE classification. SBA 504 loans have a stated purpose to promote economic development and create and retain jobs so they should not count negatively toward a bank’s requirement to hold capital in reserves. He concludes that Federal regulations will have to come up with the final decision on the issue.

In an article on, David A. Parker from Charles Dunn Company, a commercial real estate firm, said that he thinks the economic recovery that has been gaining steam as of late will not be complete until banks lend more to small businesses, the “true engine of job creation.” The SBA says that 67% of all jobs created since 2008 have been by small businesses (companies with 20 to 499 employees.) “However, there has been little regulation directing banks to lend to this cash-strapped segment of the economy,” Parker said. Instead, he writes in a guest post on the site that banks are making money by depositing capital in the Federal Reserve Bank. The same money they are borrowing at a lower rate in the first place. “That payment is labeled as ‘Interest on Excess Reserves’ but could also be called the ‘Bank Non-incentive to Loan to Small Business Plan,’” he said. When banks find less profit at the Fed and more in lending to small businesses, then the economic engine on Main Street can rebuild, reinvest and hire more employees, boosting the economy even faster. “The growth of middle America and rebuilding of the American job engine and all the buildings, equipment, jobs and supplies is what is really needed to achieve true employment and wage growth in the U.S. economy.”

Meet up with Liberty SBF to learn all about our SBA 504 Loan and pick up a copy of our white paper to see why this is the best program for small businesses. We will be at the following upcoming SBA-focused conferences:

NADCO Spring Summit, May 10-13, 2015, Washington DC

SBA Lending Technical Conference, May 5-7, San Antonio, TX

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