Obama calls on GOP to pass Small Business Jobs Bill
- Thread starter Alan Bussey
- Start date
pitzerwm
Active member
When has the government every been in sync with your needs?
Alan Bussey
Member
At 1:45 PM Eastern this afternoon the President signed into law the 2010 Small Business Jobs and Credit Act.
This new law more than doubles the maximum SBA 7a loan size from $2MM to $5MM. It also increases the maximum 504 (fixed rate) loan size for someone already in the car wash industry from $4.3 MM to $14.3MM. This new larger maximum loan size is also the maximum loan total for any single borrower who has multiple SBA loans. The larger 504 loan total will allow conveyor car wash operators the opportunity to own three times as many locations than the previous loan size maximum would allow. Since self-serve and in-bay automatics are frequently financed under the 7a program owners of these types of car washes will be able to also build or buy more than twice as many car washes using that loan type.
These new maximum loan size changes will likely have a significant impact on the car wash industry.
We expect the new regulations incorporating these changes to be published by SBA within about three weeks.
Alan Bussey
This new law more than doubles the maximum SBA 7a loan size from $2MM to $5MM. It also increases the maximum 504 (fixed rate) loan size for someone already in the car wash industry from $4.3 MM to $14.3MM. This new larger maximum loan size is also the maximum loan total for any single borrower who has multiple SBA loans. The larger 504 loan total will allow conveyor car wash operators the opportunity to own three times as many locations than the previous loan size maximum would allow. Since self-serve and in-bay automatics are frequently financed under the 7a program owners of these types of car washes will be able to also build or buy more than twice as many car washes using that loan type.
These new maximum loan size changes will likely have a significant impact on the car wash industry.
We expect the new regulations incorporating these changes to be published by SBA within about three weeks.
Alan Bussey
Red Baron
Active member
Yeah, kinda seems like 4th & 1 to me.
Red Baron
Active member
Alan I just don't know what to make of you. I don't know if you're trolling for the 1 out of 100 here who do not despise the "Jobs Bill," or if you're some Biff (Back to The Future) type character who likes irritating people over and over.
Alan Bussey
Member
Red -
Even though many of us might otherwise agree with your political opinions you might be surprised by the number of car wash industry veterans who are at this moment planning to take full advantage of the new Jobs and Credit Act. (Of course, that is the hope, since the objective is to create more jobs and foster economic growth.)
On top of the much higher loan limits the 504 (fixed rate) loan, under some simple conditions can now be used to refinance existing car washes presently financed with conventional loans. Previously 504 loans could be used only for new construction, new equipment, or for the purchase of existing buildings and equipment. Under the new Act, in order to be eligible for refinancing the conventional loans to be refinanced must have been in place for two years and the payments on those loans must have been 'current' for the most recent 12 months prior to application. Refinancing under the 504 program is a temporary provision of the new Act and is only in effect for 504 refinancing loans approved within the next two years (until September 2012).
Alan Bussey
Even though many of us might otherwise agree with your political opinions you might be surprised by the number of car wash industry veterans who are at this moment planning to take full advantage of the new Jobs and Credit Act. (Of course, that is the hope, since the objective is to create more jobs and foster economic growth.)
On top of the much higher loan limits the 504 (fixed rate) loan, under some simple conditions can now be used to refinance existing car washes presently financed with conventional loans. Previously 504 loans could be used only for new construction, new equipment, or for the purchase of existing buildings and equipment. Under the new Act, in order to be eligible for refinancing the conventional loans to be refinanced must have been in place for two years and the payments on those loans must have been 'current' for the most recent 12 months prior to application. Refinancing under the 504 program is a temporary provision of the new Act and is only in effect for 504 refinancing loans approved within the next two years (until September 2012).
Alan Bussey
Alan Bussey
Member
The Small Business Jobs and Credit Act is now law
On Monday afternoon, September 27th, HR 5297, the Small Business Jobs and Credit Act of 2010, was signed into law.
The Act was designed to help small businesses, such as car wash businesses, expand and hire new workers to help reduce unemployment across the country.
The new Act creates a $30 billion loan fund which banks can leverage to $300 billion of new small business loans. The Act includes $12 billion in temporary tax breaks for car wash businesses and other businesses. The new law also expands the Small Business Administration (SBA) loan program. It increases the guarantee for SBA’s largest loan program, the 7(a) program, and for a limited time reduces or eliminates fees for both the 7(a) and 504 programs.
The Jobs and Credit Act makes permanent and far-reaching changes to Small Business Administration guaranteed loan programs. It allows banks to make much larger individual loans to car wash businesses and also permits larger car wash businesses to take advantage of them. These larger maximum loan and larger maximum business sizes now allow car wash businesses to add locations more easily and with less equity (down payment) than they could by using conventional bank loans.
Car wash businesses that hade already reached SBA limits with their present SBA-guaranteed loans now will have access to more capital.
Pending SBA establishment of a permanent maximum size standard applicable to both 7(a) and 504 loans, the new Act establishes a preliminary standard of maximum business tangible net worth of $15 million and 2-year average business net income, after Federal income tax, of $5 million. This new maximum business size standard means that many more businesses are now eligible for SBA 7(a) and 504 loans.
Alan Bussey
On Monday afternoon, September 27th, HR 5297, the Small Business Jobs and Credit Act of 2010, was signed into law.
The Act was designed to help small businesses, such as car wash businesses, expand and hire new workers to help reduce unemployment across the country.
The new Act creates a $30 billion loan fund which banks can leverage to $300 billion of new small business loans. The Act includes $12 billion in temporary tax breaks for car wash businesses and other businesses. The new law also expands the Small Business Administration (SBA) loan program. It increases the guarantee for SBA’s largest loan program, the 7(a) program, and for a limited time reduces or eliminates fees for both the 7(a) and 504 programs.
The Jobs and Credit Act makes permanent and far-reaching changes to Small Business Administration guaranteed loan programs. It allows banks to make much larger individual loans to car wash businesses and also permits larger car wash businesses to take advantage of them. These larger maximum loan and larger maximum business sizes now allow car wash businesses to add locations more easily and with less equity (down payment) than they could by using conventional bank loans.
Car wash businesses that hade already reached SBA limits with their present SBA-guaranteed loans now will have access to more capital.
Pending SBA establishment of a permanent maximum size standard applicable to both 7(a) and 504 loans, the new Act establishes a preliminary standard of maximum business tangible net worth of $15 million and 2-year average business net income, after Federal income tax, of $5 million. This new maximum business size standard means that many more businesses are now eligible for SBA 7(a) and 504 loans.
Alan Bussey
Alan Bussey
Member
Important changes to the SBA program
With the new Small Business Jobs Act these are the primary changes specific to the two most popular SBA loan programs for car washes:
7(a) loans. SBA 7(a) loans are general-purpose loans for small businesses for the purchase, construction, or renovation of commercial real estate, including car washes, for equipment purchases, and for working capital.
- Permanently increases the SBA 7(a) loan limit from $2 million to $5 million.
This is also the new maximum total of multiple 7(a) loans to a single car wash business.
- Increases the SBA 7(a) guarantee from the present 75% to 90% for all 7(a) loans approved through December 31st, or until the appropriation is exhausted, whichever comes first. This larger 90% guarantee encourages banks to make loans where they might not with a 75% guarantee.
- Eliminates the customary Guarantee Fee for all 7(a) loans approved through December 31st, or until the appropriation for this fee waiver is exhausted, whichever comes first. For example, through December 31st this fee waiver saves $53,750 on a $2 million loan and $138,125 on a $5 million loan.
504 loans. SBA 504 loans are long-term fixed rate loans designed for small businesses to finance the purchase, construction or renovation of commercial real estate and the purchase of long-term (capital) equipment.
- Permanently increases the maximum 504 2nd lien loan size from $1.5 million to $5 million. For experienced car wash operators, this means that the total (1st and 2nd lien) 504 loan can be more than $14 million. This is also the combined maximum of multiple 504 loans to a single car wash business.
- Similar to the 7(a) loan, greatly reduces the fees for the 504 second lien portion of the 504 loan for all 504 loans approved through December 31st, or until the appropriation is exhausted, whichever comes first.
- For the very first time since inception of the 504 program, allows refinancing of conventional loans into long-term fixed-rate 504 loans.
Alan Bussey
With the new Small Business Jobs Act these are the primary changes specific to the two most popular SBA loan programs for car washes:
7(a) loans. SBA 7(a) loans are general-purpose loans for small businesses for the purchase, construction, or renovation of commercial real estate, including car washes, for equipment purchases, and for working capital.
- Permanently increases the SBA 7(a) loan limit from $2 million to $5 million.
This is also the new maximum total of multiple 7(a) loans to a single car wash business.
- Increases the SBA 7(a) guarantee from the present 75% to 90% for all 7(a) loans approved through December 31st, or until the appropriation is exhausted, whichever comes first. This larger 90% guarantee encourages banks to make loans where they might not with a 75% guarantee.
- Eliminates the customary Guarantee Fee for all 7(a) loans approved through December 31st, or until the appropriation for this fee waiver is exhausted, whichever comes first. For example, through December 31st this fee waiver saves $53,750 on a $2 million loan and $138,125 on a $5 million loan.
504 loans. SBA 504 loans are long-term fixed rate loans designed for small businesses to finance the purchase, construction or renovation of commercial real estate and the purchase of long-term (capital) equipment.
- Permanently increases the maximum 504 2nd lien loan size from $1.5 million to $5 million. For experienced car wash operators, this means that the total (1st and 2nd lien) 504 loan can be more than $14 million. This is also the combined maximum of multiple 504 loans to a single car wash business.
- Similar to the 7(a) loan, greatly reduces the fees for the 504 second lien portion of the 504 loan for all 504 loans approved through December 31st, or until the appropriation is exhausted, whichever comes first.
- For the very first time since inception of the 504 program, allows refinancing of conventional loans into long-term fixed-rate 504 loans.
Alan Bussey
Alan Bussey
Member
Fixed Rate 504 refinancing provisions
For the very first time since inception of the 504 program, the new Small Business Jobs and Credit Act allows refinancing of conventional loans into fixed rate 504 loans.
This is a brief overview of the new fixed rate 504 loan refinancing provision:
- The car wash property must be at least 51% owner-occupied.
- The debt to be refinanced must be at least two years old. (This minimum 2-year-old requirement does not apply to new car washes where a construction loan is being refinanced. That would actually be a new permanent loan to “take out” a construction loan. Permanent loans have always been available under the 504 program.)
- The car wash business must have been in operation for the entire two-year period.
- Proceeds of the loan to be refinanced must have been used for otherwise 504-eligible fixed assets such as land, building, and equipment.
- Payments on the debt to be refinanced must be ‘current’ for at least one year prior to application.
- The maximum loan-to-value (LTV) on the existing car wash property will usually be 85% as typically required for an established car wash business, but could be somewhat lower or higher in some situations.
- Can be used to refinance conventional debt only. Existing federally-guaranteed, or federally-assisted, debt is not eligible for refinancing. (Examples are SBA 7(a), SBA 504, and USDA.)
- September 2012 is the time limit to apply for 504 loan to refinance existing business debt.
- The specifics of the new rules for refinancing with 504 fixed rate loans are still being crafted at this time.
Together the new SBA program changes will allow greater access to the loans needed by growing car wash businesses.
Alan Bussey
For the very first time since inception of the 504 program, the new Small Business Jobs and Credit Act allows refinancing of conventional loans into fixed rate 504 loans.
This is a brief overview of the new fixed rate 504 loan refinancing provision:
- The car wash property must be at least 51% owner-occupied.
- The debt to be refinanced must be at least two years old. (This minimum 2-year-old requirement does not apply to new car washes where a construction loan is being refinanced. That would actually be a new permanent loan to “take out” a construction loan. Permanent loans have always been available under the 504 program.)
- The car wash business must have been in operation for the entire two-year period.
- Proceeds of the loan to be refinanced must have been used for otherwise 504-eligible fixed assets such as land, building, and equipment.
- Payments on the debt to be refinanced must be ‘current’ for at least one year prior to application.
- The maximum loan-to-value (LTV) on the existing car wash property will usually be 85% as typically required for an established car wash business, but could be somewhat lower or higher in some situations.
- Can be used to refinance conventional debt only. Existing federally-guaranteed, or federally-assisted, debt is not eligible for refinancing. (Examples are SBA 7(a), SBA 504, and USDA.)
- September 2012 is the time limit to apply for 504 loan to refinance existing business debt.
- The specifics of the new rules for refinancing with 504 fixed rate loans are still being crafted at this time.
Together the new SBA program changes will allow greater access to the loans needed by growing car wash businesses.
Alan Bussey
"Together the new SBA program changes will allow greater access to the loans needed by growing car wash businesses."
Right now there aren't many of these out there.
It would have been nice to have had some debt relief sooner when the economy was in a steep decline which put many operators in trouble. I would think that possibly refinancing debt might help but the way volumes are going and the weak economy I am not too sure that there are that many interested in a new build or investing heavily into their business at this time. Maybe they could borrow money so they could pay for additional health insurance expenses that this Administration has put on businesses that went into effect this week.
What is really needed is some tax relief for businesses and individuals alike and improvement in unemployment numbers along with stopping the continued wild spending spree this Administration has been on. People might start spending some money at the washes if they had some. If business increased many would have the money by earning it instead of going deeper into debt. Obviously you would be enthused by this bill since it should help your business. Not so sure many operators will be lining up for one of these loans so quickly.
Right now there aren't many of these out there.
It would have been nice to have had some debt relief sooner when the economy was in a steep decline which put many operators in trouble. I would think that possibly refinancing debt might help but the way volumes are going and the weak economy I am not too sure that there are that many interested in a new build or investing heavily into their business at this time. Maybe they could borrow money so they could pay for additional health insurance expenses that this Administration has put on businesses that went into effect this week.
What is really needed is some tax relief for businesses and individuals alike and improvement in unemployment numbers along with stopping the continued wild spending spree this Administration has been on. People might start spending some money at the washes if they had some. If business increased many would have the money by earning it instead of going deeper into debt. Obviously you would be enthused by this bill since it should help your business. Not so sure many operators will be lining up for one of these loans so quickly.
Alan Bussey
Member
rph -
Thank you for your business-like reply. I will try to respond soon.
Alan Bussey
Thank you for your business-like reply. I will try to respond soon.
Alan Bussey
Washmee
Fullservice Tunnel
Alan, What would the advantages be for refinancing through this program(504) verses a conventional refinance from a bank? What criteria will be used to determine the LTV? Does the waiver of fees include any appraisals needed to determine LTV?
Alan Bussey
Member
Jon -
I must leave to meet some people, but for now let me relay to you this one thing:
It is likely that the 2nd lien 'debenture' (note) will be about 41% of your total loan. Of course I'd have to do all the calculations to determine the exact portion. Whatever it is, that 2nd lien portion will have a 20-year fixed interest rate.
Unlike most conventional bank loans, there is no 'balloon' (early maturity) and no 'payable upon demand' clause (very important).
With a 504 the rate you start with is the rate it will be for the duration. There is schedule to show you the effective rate throughout the loan. For September the all-in effective rate for all 504 (2nd lien) loans nationwide was 4.62%. That is the lowest rate in the history of the SBA 504 program beginning in 1958 (52 years), and possibly the lowest rate that we will ever see again. The 504 fixed rateis based upon Treasury rates and is set in the early part of each month for all 504 loans funded that month.
The 1st lien portion is a 'conventional' loan', but typically has very attractive terms because of the low loan-to-value of that 1st lien portion. Those of us in the industry are amazed at the 504 program these days, and even more so with the new temporary refinancing option and the fee waivers.
I will respond to your other questions very soon.
Alan Bussey
I must leave to meet some people, but for now let me relay to you this one thing:
It is likely that the 2nd lien 'debenture' (note) will be about 41% of your total loan. Of course I'd have to do all the calculations to determine the exact portion. Whatever it is, that 2nd lien portion will have a 20-year fixed interest rate.
Unlike most conventional bank loans, there is no 'balloon' (early maturity) and no 'payable upon demand' clause (very important).
With a 504 the rate you start with is the rate it will be for the duration. There is schedule to show you the effective rate throughout the loan. For September the all-in effective rate for all 504 (2nd lien) loans nationwide was 4.62%. That is the lowest rate in the history of the SBA 504 program beginning in 1958 (52 years), and possibly the lowest rate that we will ever see again. The 504 fixed rateis based upon Treasury rates and is set in the early part of each month for all 504 loans funded that month.
The 1st lien portion is a 'conventional' loan', but typically has very attractive terms because of the low loan-to-value of that 1st lien portion. Those of us in the industry are amazed at the 504 program these days, and even more so with the new temporary refinancing option and the fee waivers.
I will respond to your other questions very soon.
Alan Bussey
Alan Bussey
Member
Jon -
You also asked about the LTV. For a refinance, typically 75% to 85%, depending upon the bank and the level of your experience in the car wash business.
The appraisal is done after the loan is approved, and as is customary, is paid by the applicant. Often a recent appraisal can be updated at a lower cost than by having a new one done.
Some other benefits of a 504 refinance over a conventional refinance:
Conventional refinancing may not be available, where it is available with 504 and 7a loans.
It is doubtful that conventional refinancing will provide a fixed rate fully-amortizing 20- year term on any portion of the loan.
A 504 or 7a loan has a longer amortization that most conventional loans, so the payments are lower with a 504 or 7a loan.
The fixed rate 504 second lien is assumable with a relatively simple application from the person assuming the loan. Conventional loans are not assumable.
The 504 lender will not require you to maintain any deposits with them. SBA-guaranteed lenders are less concerned with deposits than conventional lenders because the SBA lender has additional funding sources that do not require coverage with bank capital.
The lender will not require you to maintain as additional collateral any Certificate of Deposit, nor any other cash equivalent.
The lender will not require you to maintain any certain minimum or maximum financial ratios. Usually there will not be a minimum required "Debt Service Coverage Ratio" and no maximum "Debt-to-Worth".
Two of the most important advantages, in my opinion, are that there is no ‘balloon’ payment and no ‘payable upon demand’ clause.
Alan Bussey
You also asked about the LTV. For a refinance, typically 75% to 85%, depending upon the bank and the level of your experience in the car wash business.
The appraisal is done after the loan is approved, and as is customary, is paid by the applicant. Often a recent appraisal can be updated at a lower cost than by having a new one done.
Some other benefits of a 504 refinance over a conventional refinance:
Conventional refinancing may not be available, where it is available with 504 and 7a loans.
It is doubtful that conventional refinancing will provide a fixed rate fully-amortizing 20- year term on any portion of the loan.
A 504 or 7a loan has a longer amortization that most conventional loans, so the payments are lower with a 504 or 7a loan.
The fixed rate 504 second lien is assumable with a relatively simple application from the person assuming the loan. Conventional loans are not assumable.
The 504 lender will not require you to maintain any deposits with them. SBA-guaranteed lenders are less concerned with deposits than conventional lenders because the SBA lender has additional funding sources that do not require coverage with bank capital.
The lender will not require you to maintain as additional collateral any Certificate of Deposit, nor any other cash equivalent.
The lender will not require you to maintain any certain minimum or maximum financial ratios. Usually there will not be a minimum required "Debt Service Coverage Ratio" and no maximum "Debt-to-Worth".
Two of the most important advantages, in my opinion, are that there is no ‘balloon’ payment and no ‘payable upon demand’ clause.
Alan Bussey
Red Baron
Active member
OK, now this is more useful info, imo. There's an outside chance my son will buy my car wash and the 504 may be the way for him to go.
Washmee
Fullservice Tunnel
Thanks Alan. How would an operator get things started to refinance through the 504 program. What would the first step be?
Alan Bussey
Member
Jon -
For any lender in the SBA program, to do a pre-approval you just need to provide 2009 and 2008 federal income tax returns on the business entity that owns the car wash. If the car wash is not the only asset owned by the business you will need to provide a reliable Income (Profit & Loss) Statement on the car wash itself. And you need to provide a year-to-date 9/30/2010 or 8/31/2010 Income Statement. Last, to see if it is something that can be done, you'll need to provide a Schedule of Business Debts showing the balance, starting date, starting amount, maturity date, interest rate, and scheduled payments of each debt, noting the ones to be refinanced.
We are required to show that the new refinancing loan will have at least 10% monthly payment savings. If there is a balloon payment anywhere in the existing amortization schedule, or if there is a 'payable upon demand' clause, the loan is automatically eligible for refinancing under the 504 or 7a programs.
Alan Bussey
For any lender in the SBA program, to do a pre-approval you just need to provide 2009 and 2008 federal income tax returns on the business entity that owns the car wash. If the car wash is not the only asset owned by the business you will need to provide a reliable Income (Profit & Loss) Statement on the car wash itself. And you need to provide a year-to-date 9/30/2010 or 8/31/2010 Income Statement. Last, to see if it is something that can be done, you'll need to provide a Schedule of Business Debts showing the balance, starting date, starting amount, maturity date, interest rate, and scheduled payments of each debt, noting the ones to be refinanced.
We are required to show that the new refinancing loan will have at least 10% monthly payment savings. If there is a balloon payment anywhere in the existing amortization schedule, or if there is a 'payable upon demand' clause, the loan is automatically eligible for refinancing under the 504 or 7a programs.
Alan Bussey
Alan Bussey
Member
Table of Time-Limited Fee Waivers
Part of the recently-enacted Small Business Jobs and Credit Act calls for fee waivers on SBA-guaranteed loans approved through the end of this year. SBA-guaranteed loans are often used to refinance, buy, or build car washes.
Below is a link to an easy-to use table that shows the amount of money that you will save on your SBA-guaranteed loan if it is approved by 12/31/2010. As you can see, the savings is considerable, often tens of thousands of dollars. But the final date is December 31st. It appears that this will be the last in a series of these unprecedented periods starting in February 2009 when the Guaranty Fee has been temporarily eliminated. So, if you plan to borrow, to beat the deadline start your application process very soon.
The table also shows the temporarily higher SBA guarantee percentage, which increases a bank's willingness to do the loan. And it shows the new permanently higher loan limits.
There is a link below the table that will bring you back to AutoCareForum.
http://carwashloans.com/Guaranty_Fee_Table.htm
Alan Bussey
Part of the recently-enacted Small Business Jobs and Credit Act calls for fee waivers on SBA-guaranteed loans approved through the end of this year. SBA-guaranteed loans are often used to refinance, buy, or build car washes.
Below is a link to an easy-to use table that shows the amount of money that you will save on your SBA-guaranteed loan if it is approved by 12/31/2010. As you can see, the savings is considerable, often tens of thousands of dollars. But the final date is December 31st. It appears that this will be the last in a series of these unprecedented periods starting in February 2009 when the Guaranty Fee has been temporarily eliminated. So, if you plan to borrow, to beat the deadline start your application process very soon.
The table also shows the temporarily higher SBA guarantee percentage, which increases a bank's willingness to do the loan. And it shows the new permanently higher loan limits.
There is a link below the table that will bring you back to AutoCareForum.
http://carwashloans.com/Guaranty_Fee_Table.htm
Alan Bussey
