SBA loan program raises concerns

LOS ANGELES – Months after Congress authorized a new loan program to help companies at risk of foreclosure, the Small Business Administration says it’s ready to get started.

But the agency has restricted access to the loans so significantly that many businesses in danger of losing factories, offices or stores won’t qualify. Excluded are any firms that already have real estate loans backed by the SBA, along with many that refinanced at unfavorable rates during the worst of the credit crunch.

Under the rules announced last week, businesses facing balloon payments on buildings in which their businesses are housed will be allowed to refinance with loans guaranteed by the federal government, even if those buildings are no longer worth the full amount of the mortgage.

But the loans will be available only to those companies whose mortgages are coming due over the next 24 months. And the program will cover properties that are worth less than what’s owed on their mortgages, or underwater, only if the owner puts up 10 percent of the loan amount in cash or has equity in another property.

Additional collateral, such as equity in the family home, would also be required in many cases.

The agency also plans to charge businesses fees for the loans. According to the regulations released earlier this month, borrowers will have to pay 1.043 percent annually in addition to interest charged by their lenders.

For a $1 million loan, that amounts to about $870 a month.

The SBA has also, for now, abandoned a provision in the law passed last year that would allow companies to use the loans to help pay business expenses in certain circumstances.

Congress authorized the program in September with the passage of the Small Business Jobs Act, but it could not go into effect until the SBA came up with rules and regulations to govern the loans.

Businesses can begin applying for the loans Monday.

The SBA estimated that 20,000 businesses nationwide will qualify for the loans, for a total of $15 billion over two years.

Another reason for the restrictions, SBA officials said, was concern that the agency could have been forced to assume too much risk if lenders used the government program to refinance debt they wanted to get off their books.