In order to encourage lending these changes included the drastic reduction in SBA loan fees. The result for SBA 504 loans was the elimination of all out-of-pocket loan fees. When combined with the current historically low rates (May interest rate is 5.29%) the stimulus bill has made it an ideal time for small businesses to purchase a building.

Some of the businesses which have taken advantage of these benefits by recently obtaining SBA 504 financing from TMC include the following:

Pinnacle Manufacturing Corp.
Morgan Hill, CA
Type of Business: Manufacturing – Sheet Metal

Skidmarks, Inc.
San Francisco, CA
Type of Business: Design

Miss Mirage Corp.
Los Angeles, CA
Type of Business: Suppy – Beauty

Piace Fashion, Inc.
Los Angeles, CA
Type of Business:  Contractor – Garment

Cannon Safe, Inc.
Claremont, CA
Type of Business: Security – Home Safes

D III Transport Corporation
Poway, CA
Type of Business: Automotive – Transportation

To learn more about SBA 504 loans or how the stimulus package affects small business financing please contact us at 888.989.8855 or find information online at www.tmcd.com.

On Tuesday, March 24, 2009 TMC participated in a popular talk show that is broadcasted daily on Sing Tao Chinese radio (1400am). The show is hosted by Ida Choy Yee-Yee and typically features business experts discussing a current subject and answering questions from callers.

The topic of Tuesday’s show was “How has the stimulus package affected U.S. Small Business Administration (SBA) lending programs” and guests included SBA Program Manager Michael Elkin, and TMC Loan Officer Audrey Kan.

Ms. Kan explained the basics of the SBA 504 loan program to listeners and described how the 2009 stimulus package made it even easier for small businesses to obtain SBA 504 financing. Presently, the biggest benefit for potential borrowers from the stimulus package is the temporary elimination of all out-of-pocket fees for SBA 504 loans. This is effective for all new loans approved after 2/17/2009 and will remain in effect through the end of 2009 or until funds are exhausted.

When combined with the extremely low interest rates for SBA 504 loans right now – the March rate of 5.53% is the lowest rate in over 6 years – the stimulus package fee elimination makes it a great time for business owners to utilize SBA 504 financing.

The stimulus package included additional items which benefit the SBA 504 loan program that are currently under review for determination of implementation dates and details. TMC will continue to post updated information as it becomes available on our website at www.tmcd.com.

TMC is very excited about the opportunity for more small businesses to have access to capital they need to sustain and grow their operations. We enjoyed participating in the Sing Tao radio show and reaching out to the local Bay Area Chinese speaking audience.

It was announced today that the stimulus bill provision regarding the elimination of all out-of-pocket SBA 504 fees will be effective for any loan approved on or after February 17, 2009.

This includes the 1.5% loan processing fee and the .5 bank participation fee. The fee elimination will apply until the $3.6 billion allocation has been exhausted. SBA estimates it will be in effect for loans approved through approximately December 31, 2009.

Take advantage now!

• No out-of-pocket fees for SBA 504

• Current rate is the lowest since June 2003

We are still waiting for clarification on another exciting provision from the stimulus bill – the ability to offer refinancing using the 504 loan program.

TMC is committed to keeping you informed as new information is announced. Please call me or any TMC staff with questions you have about the stimulus bill.

Best regards,

Barbara Morrison
President
TMC Development

PREVENT SMALL BUSINESS FORECLOSURE CRISIS AND JOB LOSSES

The stimulus bill encourages lending largely by decreasing borrower costs on new SBA loans. However, the needs of small business owners who have existing SBA financing have not been addressed. In the past 25 years over 100,000 entrepreneurs have purchased real estate for their businesses using the SBA 504 loan program. Immediate relief is needed for existing SBA 504 borrowers to prevent a commercial mortgage foreclosure crisis and massive job losses.

It is universally acknowledged that mortgage relief for home owners is a necessity to reduce residential foreclosures. The parallel problems associated with commercial foreclosures have not been considered.

With just minor changes to current SBA regulations or policy, we can help existing borrowers avoid foreclosure. These changes require zero funding and will make a profound difference in preventing commercial foreclosures and the accompanying job and tax revenue losses.

Many of today’s borrowers have discovered that their SBA loan has trapped them in a building they can no longer afford. In many cases, the property value is less than the total outstanding loans and there are virtually no buyers for these buildings today. For the thousands of small businesses currently struggling to make SBA loan payments, losing their building will mean shutting down their business and putting all of their employees out of work. In addition to exacerbating the home mortgage crisis, this is the antithesis of what SBA 504 loans are designed to accomplish – job creation and tax revenue – not job loss and business closure.

The changes to SBA loan servicing regulations we are proposing require no additional funds and they will dramatically improve the chances for our nation’s small businesses to continue operating in their buildings. We must take immediate action to prevent a major commercial mortgage foreclosure crisis.

PROPOSALS TO PREVENT SMALL BUSINESS

FORECLOSURE CRISIS AND JOB LOSSES

1. Proposal: Create pilot program to include CDC servicing fees in new loans when debentures are purchased by SBA. The CDC which originally processed the 504 loan will continue to work with the borrower and SBA to service the new loan.

Cost: NONE

Currently: SBA has ability to modify loan terms for borrowers by issuing Note Receivables. Currently the Note terms do not include CDC servicing fees for maintenance of the new SBA loan.

Purpose: Given today’s economic crisis, loan modifications are becoming increasingly necessary to prevent foreclosures. Unless the CDC’s role in maintaining servicing is continued for the new loan, current SBA staffing will not be sufficient to service the volume of new loans that the portfolio needs to remain viable.

2. Proposal: Extend unilateral authority for CDCs to offer 12 month loan deferments.

Cost: NONE

Currently: CDCs have unilateral authority to offer 6 month loan deferments to troubled borrowers. CDCs must apply for SBA approval to obtain a 12 month loan deferment.

Purpose: Due to current economic conditions SBA has become inundated with deferment requests. In the coming months requests will continue to increase dramatically creating a longer turnaround time for approval – a situation which does not benefit SBA or borrowers. Allowing CDCs to offer 12 month deferments will prevent the detrimental delays we will otherwise experience.

3. Proposal: Extend catch-up plan for deferments to spread the deferred amount over the remaining life of the loan.

Cost: NONE

Currently: Catch-up plan for deferments is structured such that deferred amount is spread over a 60 month payback period for borrowers.

Purpose: The 60 month payback period is difficult for borrowers in the current economy. Extending the payback period to the remaining life of the loan lowers the borrower’s monthly payment making the ongoing cost more affordable.

4. Proposal: Allow borrowers to use $35,000 ARC loans to make payments on SBA 504 first mortgage loans.

Cost: NONE

Currently: The 2/17/09 stimulus bill includes a provision for a new loan program, America’s Recovery Capital (ARC) (formerly the Business Stabilization Program), which will provide loans up to $35,000 to borrowers experiencing immediate financial hardship.

Purpose: Allowing borrowers to use ARC loans to make payments on their SBA 504 first mortgage loans will increase their chances for financial recovery and therefore help prevent foreclosures and job losses.

Dear TMC Community,

We received an update today regarding the implementation of the stimulus bill provisions which affect SBA real estate financing. SBA has been given the authority to determine how these provisions will be employed but has not yet issued any particulars.

The update from NADCO (National Association of (Certified) Development Companies) explains that while SBA has begun discussions there are still no confirmed details to share at this time.

Excerpts from the NADCO President’s message dated 2/23/09:

“NADCO met with SBA officials on Friday to discuss their plans and process for creating Regulations/notices to provide the guidance that you need to process and service 504 loans.”

“By far, the question asked most often is: when do the two 504 fee offset items in the bill kick in for the benefit of our 504 borrowers? NADCO firmly believes that the following language is quite clear from Section 501(b) of the bill: “for which an application is approved or pending approval on or after the date of enactment of this Act.” However, the conclusion I draw from our meeting is that they are studying this language, and other bill provisions, and may issue a different interpretation on the timing of the fees offsets. It would seem the only two alternatives are: (1) they start with loan packages already in process, or submitted on or after 2/17/09, date the bill was signed by the President, or (2) they start on the date of issuance of new Regulations in the Federal Register. . . . Optimistically, it will be circa March 10th before we know what SBA has decided. It could possibly be additional weeks.”

“Yet another area of high interest, especially to many of your bank lenders, is how will the new first mortgage secondary market $3 billion in pool guarantees be implemented? NADCO has volunteered to work with major poolers (most of whom are locked out of the market today) to provide some suggestions to SBA on this process of allocating these guarantees.”

“Given the short timing window and substantial nature of this legislation, I think SBA may work to put forth regulations and procedures on a piecemeal basis as fast as they can in the coming days or weeks. That way, we can get the benefits flowing quicker to our borrowers.”

TMC is committed to informing you as soon as any changes are implemented, or answers regarding the issues raised above are made known. In the meantime please do not hesitate to contact me or any TMC staff with questions.

Best regards,

Barbara Morrison
President
TMC Development

Dear TMC Community,

By now all of you have heard about the stimulus package signed by President Obama yesterday. While we still do not have all of the details, I would like to explain how this will affect SBA real estate financing.

The good news is this – the package includes items which will have a very positive effect on SBA real estate loans. The provisions outlined below are intended to stimulate lending as well as decrease borrower costs, but clarification is needed before we can knowingly define the effects. TMC is committed to keeping you informed of these changes.

The next step is to wait and review SBA’s guidance as SBA was given the responsibility of determining the exact implementation parameters for the bill provisions. They are working as quickly as possible and we expect to have more information by early next week.

SBA Stimulus Package Highlights Include:

• Allows small businesses to refinance existing debts, including SBA 504 loans, as follows:
  • Any 504 project “may include a limited amount of debt refinancing”
  • If the project involves expansion of the small business, an amount not to exceed 50% of the project cost may be refinanced, if:
    • Proceeds will be used to acquire land, to construct or expand building, or to purchase equipment
    • Existing debt is collateralized by fixed assets
    • Existing debt was incurred for benefit of small business
    • Proceeds will be used only for refinancing existing debt or costs related to the project
    • It will provide a substantial benefit when prepayment penalties, financing fees and other financing costs are accounted for
    • Borrower is current on all payments of the existing debt for not less than one year
    • New financing will provide better terms or interest rate

• No out of pocket fees for SBA 504 and SBA 7a loans:
  • Reductions in SBA 504 borrower fees – Appropriated funds will pay fees for borrowers including the 1.5% loan processing fee and the .5% bank participation fee. The total 504 fees will now be only .65%, which is not paid out of pocket.
  • Elimination of out of pocket fees on SBA 7a loans

These fee changes will stay in effect until the appropriated funds have been spent.

• Establishes an SBA Secondary Market Guarantee Authority - SBA will be permitted to provide up to $3 billion in guarantees for pools of first lien position 504 loans that are to be sold to third-party investors. The qualifying loans are first mortgage position, non-federally guaranteed loans made by private sector lenders.

• Temporary increases in the guarantee percentage on SBA 7a loans – up to 90%

I will follow-up as soon as possible with accurate and detailed information as the particulars are made known. The bottom line is that the package includes numerous items which will have a very positive effect on SBA real estate financing. In the meantime please do not hesitate to contact me or any TMC staff with questions.

Best regards,

Barbara Morrison
President
TMC Development