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SMBs Have Option to Refinance Loans

Small businesses across the country have the option to obtain a loan from the U.S. Small Business Administration (SBA) to help fund expansion projects, recover from a natural disaster or achieve other goals, which in turn stimulates job growth and economic activity. The SBA recently announced support for an extension of the 504 Debt Refinance program.

Consider Refinancing To Counter Slow Recovery
Allowing small businesses to refinance their loans would reduce monthly payments, freeing up capital for growth and advancement. The extended refinancing program would apply to more than 400 small businesses nationwide and add more than $500 million in capital flow if old debt payments were modified. The refinance program had expired last year, but the demand remains with companies across the country, prompting lawmakers to extend the effort.

Introduced as part of the CREED Act, the refinancing legislation aids in the creation of new jobs as well as equips businesses with the necessary capital and resources to respond to market fluctuations and stay afloat for long-term success. Many companies suffered losses during the economic downturn and have yet to rebuild what was lost, including their staff numbers. Lowering monthly payments would accelerate this recovery, which is particularly important in light of the recent cutbacks to federal funding across all industries implemented with the sequester.

SBA Loan Performance
According to Bloomberg, the SBA has not launched any new loan programs for small businesses in the past few months, but the agency's efforts to expand loan availability and make the guarantee process more efficient are still in place. The SBA's government-guaranteed loans jumped 6 percent year-over-year in the fiscal year 2013 over 2012, totaling $9.2 billion in business capital.

The source reported the 2009 American Recovery and Reinvestment Act and the 2010 Small Business Jobs Act both strengthened the SBA's influence on small business growth. In fiscal year 2011, the SBA peaked at guaranteeing $24.5 billion in loans for 7(a) and 504 loan programs, and followed that with another $21.8 billion the following year. The 504 loan program in particular has helped startup companies refinance debt quickly, allowing these companies to grow during slow economic activity. When the legislation expired last September, 400 loan applications were left unfulfilled and thus an extension would be helpful to many enterprises.

"The reality is that, on conventional lending, the banks are still reluctant to do smaller dollar loans, under $350,000, for newer businesses that are more reliant on debt and have less of a track record," said Jeanne Hulit, SBA associate administrator for capital access, as quoted by Bloomberg Businessweek. "They are still relying on SBA to be comfortable with that kind of lending."

The CREED Act 
The Commercial Real Estate and Economic Development (CREED) Act falls under the 2010 Small Business Jobs Act but was fully deployed in February 2012. Because the measure was slow to take off, a limited number of small businesses were able to refinance before the September 27, 2012, deadline. However, during those few months, more than 2,700 small businesses were able to refinance about $7 billion in debts and reinvest the capital into their businesses. In doing so, many communities were able to preserve jobs that would have been lost, as well as add new employment opportunities to spur economic activity.

"At this time in our economy, with unemployment still stuck at 7.7 percent, it is imperative that Congress enact measures like the CREED Act to help small businesses access the capital they need to create jobs," said Beth Solomon, National Association of Development Companies president and CEO. "This is a no-brainer for both sides of the aisle."