Best Commercial Loan Calculator » news http://bestcommercialloancalculator.com Commercial Loan Calculator Tue, 21 Sep 2010 02:33:23 +0000 en hourly 1 http://wordpress.org/?v=3.3.1 SBA – Supply issues http://bestcommercialloancalculator.com/sba-supply-issues/ http://bestcommercialloancalculator.com/sba-supply-issues/#comments Thu, 10 Sep 2009 04:32:14 +0000 admin http://bestcommercialloancalculator.com/?p=32 SBA loan volume has been affected by Supply-Side liquidity issues on the part of most banks. Banks that fund SBA loans want to sell the debt into the commercial secondary market. If they fail to do this they will have to account for the loan balance in their reserves.

Selling the guaranteed part of the loan, banks only need to tap their reserves for the remained of the account.
A big reason that demand for SBA 7(a) loans has fallen in the secondary market is that many market investors have their funding sources tied to the London Interbank Offered Rate (LIBOR). And LIBOR has increased dramatically against the prime rate to which most SBA 7(a) loans are tied. When the LIBOR is 4.3 percent and prime is 4 percent, for example, it no longer makes sense for foreign investors to purchase securities linked to the prime rate.
The SBA has recognized this problem. This past November, it started to allow banks to use the one-month LIBOR plus 3 percent, in addition to the prime rate, as the loan’s base rate. This change should help to eliminate the LIBOR/ Despite these supply-and-demand issues, SBA loans are still available to small-business owners, and banks are still providing them.
Try getting your small-business clients a barbershop, gas station or motel loan with straight conventional financing at any decent LTV — it’s very unlikely. With scarce options for conventional lending for high-leverage loan requests, brokers will turn to the SBA for the funding of choice for many owner-users in today’s market.

]]> http://bestcommercialloancalculator.com/sba-supply-issues/feed/ 0 SBA Saves The Day http://bestcommercialloancalculator.com/sba-saves-the-day/ http://bestcommercialloancalculator.com/sba-saves-the-day/#comments Thu, 10 Sep 2009 04:29:47 +0000 admin http://bestcommercialloancalculator.com/?p=28 The past year was a tough one for the commercial mortgage industry. Figures were down across the board as lending slowed down.
The slow down included U.S. Small Business Administration (SBA) loans, as well. In fiscal year 2008, SBA-approved loans fell 29 percent from fiscal 2007.  SBA’s combined loan value dropped by about 13 percent in that same period.
Commercial mortgage brokers who work with SBA loans, it’s helpful to know the potential reasons for the recent drop. With this knowledge, brokers will be able to determine which SBA loan programs will suit their small-business clients’ needs.
Many were taken back by the SBA-loan-volume decrease. Supply-and-demand issues caused banks to slow even their SBA-lending activities. Brokers must understand these issues to help their small-business clients determine whether SBA loans are right for them.
Three key issues that affect borrowers’ demand, contributing to the slowdown in SBA-loan closings.
Number one, SBA loans are expensive due to the fees when compared to conventional loans. The 7(a) loan program’s guarantee fee, for example, can be as much as 3.75 percent. The 504 loan program, which small-business owners often use for real estate, has fees of around 3 percent, according to the SBA.
From a broker’s perspective, selling a 3% guarantee fee is not a walk in the park. Owner-user borrowers who have nowhere else to go for high-leverage, low-interest-rate financing so they even avoid the SBA financing because of the fee. This continues despite the fact that the fee is rolled into and financed with the loan amount.
Number two, interest rates are key when it comes to decisions to forgo SBA financing.  Some borrowers, for example, would rather pay double-digit rates than refinance into an adjustable-rate loan.
Many of these borrowers is that they don’t want to have to refinance their loan now and then again a few years later— not to mention paying the third-party costs and fees again.
This strategy may make sense if investors come back and start buying commercial loans on the secondary market soon. Brokers and their borrowers must consider whether that is likely, given current market conditions.
With all the cheap assets available to investors today, it may take a while for them to see the value in commercial mortgage-backed securities.
Number three and final issue involves the SBA’s new standard operating procedure (SOP), which started this past August. While the SBA reduced it’s SOP size, it also reduced the required loan to value (LTV) for most special-use-property purchases from 85 percent to 80 percent. Due to this many planned purchases are delayed because borrowers must build up their cash to meet the new requirement.
Gas stations that are more than five years old are required to obtain a Phase II environmental site assessment and indemni-fication agreements via the SOP.  Borrowers wishing to finance gas stations that are older than five years are therefore looking for other financing options.

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