September 5, 2017
By Bob Coleman
Editor, SBA Hot Topic Tuesday
SBA Hot Topic Tuesday — 77% Support SBA Lenders Funding Disaster Loans
The stories about Main Street Texas are heartbreaking. And it looks like Act II may open in Florida next week.
I’m not going to get into the debate of how many small businesses permanently close their doors after a disaster (some say 40%, while others say only 5%.)
We all agree even one is one too many.
Last Friday, I polled the industry to gauge interest if SBA lenders want the ability to approve and fund small business guaranteed disaster loans.
You overwhelming support the idea — 77% say yes. However, due to the risky nature of these loans, 41% want a full 100% guaranty, while 39% say they could figure out how to make it work with a 90% guaranty
And response time? 29% say they have a market presence in Texas and could accept applications today. And 19% say they’re not in Texas, but they would open up an office and send staff ASAP.
And I appreciate all of your comments. Here is a different take.
Harry Leach of Capital CDC writes, “Bob, You are asking the wrong questions. Here in Houston, the question is how do I make payroll today after being closed for a whole week. I need money from the bank but all my computer financial records and tax records were destroyed by the flood.
Harry continues, “Disaster loans are meant as a last resort and PLP lenders along with CDCs can make loans to existing borrowers without waiting on SBA. It just requires the willingness to make unsecured loans to businesses that are closed.”
Jim Baird of Bay Area Development Company says this is a great idea and the industry wants to help. “If the program was reasonably structured many, if not most of these lenders near the disaster area would do this on a pro-bono basis.”
Finally, another lender proposes another way lenders could help. “What about the idea of current SBA lenders doing a first round review of applications before they are submitted to the SBA. Similar to screen-out process at loan centers, but completed by the private market. This would reduce stress on the centers and enable banks to contribute their expertise without significant expense.”
Deferments for SBA 7(a) and 504 Business Loans, Microloans, and Disaster Loans for Businesses
Adversely Affected by Hurricane Harvey and its Aftermath
From SBA Notice 5000-4021
SBA is also strongly encouraging 7(a) Lenders, Certified Development Companies (CDCs) (as well as third party lenders that provide the private sector financing for 504 projects), and Microlenders to provide similar deferment relief for borrowers with lender or CDC-serviced SBA-business loans in the primary disaster areas and contiguous counties/parishes. District
offices and servicing centers shall advise lenders of the need to accommodate borrowers adversely affected by the events of Hurricane Harvey. Since many SBA-guaranteed loans are
sold in the secondary market, it is also important to note that 7(a) Lenders can provide one 90 day deferment without requesting approval from the secondary market purchaser. A longer deferment period may be available; however, the lender must send a written request to the fiscal and transfer agent (Colson Services Corp).