The new stimulus package is providing more than just emergency relief for small businesses.
While the $900 billion legislation
The package authorizes $2 billion for the SBA’s 7(a), 504 and Microloan programs, while allowing the agency to waive borrower and lender fees, according to legislative summaries of the law. The SBA will be able to raise the standard guarantee on 7(a) loans to 90% from 75%, retain the size threshold for SBA Express loans at $1 million and authorize a 504 Express program to expedite approval of loans under $500,000.
“We think banking and small businesses are winners from the proposed second round of fiscal stimulus,” Chris Marinac, an analyst at Janney Montgomery Scott, wrote in a note to clients Tuesday. “Remember, banks are mirrors of the communities they serve. An improved economy should be [a] positive.”
Boosting guarantees and waiving fees helped spark a surge in SBA lending after the 2008-9 financial crisis, and Rep. Nydia Velazquez, a Democrat from New York who chairs the House Small Business Committee, said she expects a similar result in 2021. Those changes should “go a long way to help build back better,” Velazquez said in a statement Monday.
"I expect 7(a) to grow tremendously," said Chris Hurn, CEO of Fountainhead Capital, a nonbank lender in Lake Mary, Fla. "Small businesses need working capital."
SBA spokeswoman Shannon Giles said Tuesday that agency officials were reviewing the text of the stimulus bill.
Bankers were pleased to see other benefits included in the relief package.
The stimulus package funds several months of principal and interest payments for most 7(a) and 504 loans, depending on when the loans were originated, as well as a borrower’s size and financial circumstances. In all cases, the monthly payments are capped at $9,000.
“I was really grateful to see the … inclusion of additional SBA payment assistance,” said Jill Castilla, CEO of the $322 million-asset Citizens Bank of Edmond in Oklahoma. Similar relief in the original stimulus package “likely saved thousands of small businesses throughout the country,” she said.
The overall package “looks really good,” said Nimi Natan, president and CEO of Gulf Coast Small Business Lending, a unit of the $2.3 billion-asset Gulf Coast Bank and Trust in New Orleans.
“It’s what we’ve been asking for,” Natan said. “It’s what our borrowers need.”
Lenders had been pushing legislators and the SBA to fortify the 7(a) program, noting that volume in the 2021 fiscal year was down from a year earlier. Through Dec. 18, the agency had guaranteed $4.6 billion in 7(a) loans, a roughly 5% decline from that date in the 2020 fiscal year.
Borrowers eager to apply for PPP loans, which can be forgiven, have balked at traditional SBA loans, said Rohit Arora, CEO of the small-business lending platform Biz2Credit. But there should be “a pretty big uptick in SBA lending” if the economy bounces back next year, he said.
The $285 billion authorized for the PPP could be exhausted in as little as four weeks, Arora said, because Congress removed uncertainty over areas such as the forgiveness process and tax deductions for expenses covered by the loans.
“Businesses have been waiting desperately for this,” Arora said. “Things should get very busy after Christmas.”
Paul Davis contributed to this report.
