The 504 Loan Program provides long-term fixed asset financing to purchase buildings, land and major equipment. A typical package requires that the borrower put 10 percent down with 50 percent coming from a participating lender and 40 percent from a Certified Development Company. The SBA guarantees the 90 percent that is financed. The 7(a) Loan Program guarantees loans made to small businesses for working capital and other general purposes.
The proposed changes are numerous, but these two are the most important:
- Easing affiliation restrictions. The SBA has complex rules governing whether or not a business is “small” and therefore qualifies for participation in its programs. If a person or group of people own more than one small business, it's likely that all the businesses would be considered “as one” and limit the ability of each business to qualify. The SBA wants to ease this rule so more businesses with cross management and ownership can apply.
- Elimination of personal resource test. Currently, the SBA has complex rules that make many businesses ineligible for its programs if the owner or owners have personal assets that can be used in the business. The thinking was that SBA programs should be a financier of last resort. This test would be eliminated.
The proposed changes will remain in the comment period until April 26. This is your opportunity to let the SBA know what you think about these proposed changes. To comment, go to the Federal eRulemaking Portal and use the code RIN: 3245-AG04 or send an email to firstname.lastname@example.org.
[Small Business Administration]
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