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SBA Bailing Out Some CRE?

Posted by Larry Doyle on February 5, 2010 2:17 PM |

What is the mission of the SBA, the Small Business Administration?

The U.S. Small Business Administration (SBA) was created in 1953 as an independent agency of the federal government to aid, counsel, assist and protect the interests of small business concerns, to preserve free competitive enterprise and to maintain and strengthen the overall economy of our nation. We recognize that small business is critical to our economic recovery and strength, to building America’s future, and to helping the United States compete in today’s global marketplace. Although SBA has grown and evolved in the years since it was established in 1953, the bottom line mission remains the same. (LD’s highlight)

The SBA helps Americans start, build and grow businesses. Through an extensive network of field offices and partnerships with public and private organizations, SBA delivers its services to people throughout the United States, Puerto Rico, the U. S. Virgin Islands and Guam.

Perhaps I should have written what was the mission of the SBA, because today President Barack Obama announced that his administration plans on utilizing the SBA to provide financing to a small part of the commercial real estate market.

The Washington Post provides a quick synopsis of this development, along with an expanding footprint for the SBA’s traditional lending business, in writing Obama Calls for Beefed up Small-Business Loans:

Obama said he wants businesses to be able to refinance their commercial real estate loans under the Small Business Administration and he wants that government agency to increase loans used for lines of credit and capital.

“The truth is, the economy can be growing like gangbusters for years on end and it’s still not easy to run a small business,” Obama said as he visited a heating and air conditioning company in a Maryland suburb of the capital.

He reminded reporters that every once in a while, a small business becomes a large corporation that employs thousands.

The White House said Obama’s plan would temporarily increase the cap on Small Business Administration Express loans from the current maximum of $350,000 to $1 million. Obama’s plan would also expand the SBA’s program to support refinancing for owner-occupied commercial real-estate loans.

To be eligible, business owners must have first mortgages and be current on all loan payments for the previous year. The White House said the proposal would help refinance up to $18.7 billion each year in commercial real estate that might otherwise be foreclosed and liquidated.

The move, however, requires Congress to act – something of an open question, given that Democrats lost their supermajority only a day earlier when Republican Sen. Scott Brown took office to replace the late Democratic Sen. Edward M. Kennedy of Massachusetts.

An immediate reaction from a CRE market participant was not exactly overwhelming. How so? This individual said, “once they (the government) get into the market, we’ll never get them out.”

Such is life in the Uncle Sam economy circa 2010.


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