It’s officially been one year since the Small Business Jobs and Credit Act was passed into law. While some good has come from it, there are a few things that have been pretty ineffective so far. The two things that frustrate me the most are the First Mortgage Lien Pool (FMLP) Program and the SBA 504 Loan Refi Program.
You probably know that I’m not a proponent of “big government” and increased regulation, but these two programs could be extremely effective when it comes to helping small business owners. Plus, they have to do with the SBA 504 loan program which is a zero-subsidy program — it’s funded by borrower fees, not subsidized by the government. Right now, both the FMLP and the 504 Refi Programs are in need of our help. Watch the video below to find out what needs to be done to make these programs more effective, and what I’d like YOU to do to help:
I hope I’ve explained the problem with the FMLP and 504 Refi Programs enough in this video. If we can get the “sunset” provisions lifted on these two programs, it will be a HUGE step toward getting America’s small business owners the capital they need to grow and flourish and help get our economy back on track.
As I mentioned in the video, here’s what I’d like you to do:
> Go to www.house.gov.
> Enter your zip code in the box in the top right corner that says “FIND YOUR REPRESENTATIVE.”
> On the next page, click the envelope icon next to your Representative’s picture.
> You’ll probably have to click the “email” button on the right hand side of the next page, and then you can enter your contact details in the email form.
> Copy-and-paste the following message in the comment section of the email form and send it on.
SUBJECT:
Help Our Small Businesses!
COMMENT:
I know the Small Business Jobs and Credit Act of 2010 has been helpful in some ways, but I strongly urge you to support changes to two programs that will dramatically help America’s Small Businesses. Both the First Mortgage Lien Pool (FMLP) Program and the SBA 504 Loan Refi Program are facing “sunset” provisions in September of 2012, just one year from now. Each of these programs has been only marginally helpful for small businesses because of implementation.
These programs need more time to be truly effective, and I have some numbers to back my argument. The FMLP Program was created in February 2009 and given a two-year extension from the first pooling date, which was in September 2010. The program was allotted $3 billion in “government guarantees” (funded by borrower fees) with the goal of injecting liquidity into the marketplace, and only about $200 million (roughly 7%) of these funds have been used. It seems unlikely that the remaining 93% of the funds allotted for this program will be used if it is allowed to sunset one year from now.
The SBA 504 Refi Program was created in September 2010, but the regulations weren’t announced (slowly rolled-out) until February 2011. It turns out that some of the regulations were so restrictive that rejection rates have been as high as 90% for this program. Like the FMLP Program, the 504 Refi Program hasn’t made full use of its funds either. Out of the $7.5 billion (funded by borrower fees) allotted for 504 refinances for FY 2011, a mere $200 million (about 3%) has been tapped. Another $7.5 billion has been alotted for FY 2012, and again, it’s hard to believe that these funds will actually be put to full use to help America’s small businesses.
In order to give these two programs the time needed to work well, I humbly ask that you support lifting the sunset provisions on the FMLP and 504 Refi Programs that were part of the Small Business Jobs and Credit Act of 2010.
Thanks for your time.
And that’s it. If you’ll send this message (or some version of it) to your Representative in Washington, you will make my day. Usually I like to hear what you think about what I’ve written or spoken about here, but it’s more important that you send a message to your elected official in this case. If you simply must comment, please don’t do so until you’ve sent the message to your Representative. Again, I really appreciate your support of these programs, both of which will be of great help to America’s small businesses…if they’re given more time to be truly effective.
Thanks for reading, watching, and taking action!
Chris
P.S. Don’t forget that right now is one of the best times in recent history for small business owners to purchase or expand their commercial facilities. Property values are still down and interest rates are at all-time lows, making this decision a no-brainer in a lot of cases. If you know a business owner who ought to be talking to us about owning their commercial real estate, call me at 1-866-622-4504 or email me at ChrisHurn@MercantileCC.com.
Tags: commercial property financing, commercial real estate loan, Mercantile Capital Corporation, SBA 504 Loan, SBA 504 Refinance, Small business, small business loans, US Economy, wealth creation
James Eisberg says:
Hey Chris:
I concur that extension of two programs within the Small Business Jobs & Credit Act may help recovery, and looked around your website for language promised on your video to pass along to my Congresspersons. I couldn’t find it, so I wrote the following, which I hereby submit for your approval:
The Small Business Jobs and Credit Act was passed a year ago, but its implementation lag and its low profile will let it some good, nonsubsidized programs, the First Mortgage Lien Pool (FMLP) Program and the SBA 504 Loan Refinance Program, sunset before their effect becomes measurable. These programs need to be extended until they can be fully utilized, which, if we follow Japan’s example of pretending that there is nothing structurally wrong with our economy and raising taxes without raising taxable incomes, will be at least ten years.
The reason I kind of went off on that tangent about a likelihood of a long period of economic malaise is that I believe that (1) part of the problem is wealth redistribution upward over the past several years, which went against the basic premise of most adjustable mortgages, which was that salaries would increase over time, and (2) nobody’s situation will improve until Main Street gets a bail out and the people who put us in this situation (fraudulent and predatory loan originators, bundlers, creators of unfathomable assets, sellers and raters of those assets, and even real estate practitioners and appraisers are identified and sent packing if not up the river. I propose that wealth be redistributed back downward by forcing banks to rewrite all underwater mortgages so that the principal is equivalent, on a percentage basis, to what that percentage would be if the property value had remained the same as at closing and all payments had been made. This, which I call the “fixed equity loan”, could be adjusted annually (or at other intervals based on local reassessment intervals) as the assessed value of the property goes up or down.
I also propose that no government benefit (tax break, contract, even deposit into a bank) go to any company where any executive makes more than 20 times the amount of the lowest-paid worker with the same seniority (e.g., if a new-hire makes $10/hour or $80 a week, a newly-hired CEO can make no more than $1600/week, or $83,200/year). This would likely raise the pay of the lowliest workers and cause a lot of companies to break up into smaller units. I further propose that no company be allowed to buy any other company, or any two companies be allowed to merge, unless they produce an economic impact statement showing that no employees or independent contractors will be let go as a result of the transaction. If this is class warfare it’s merely a correction to today’s War on the Middle Class, as perpetrated by tax code writers, union busters, and political and media liars (who seem to have used The Big Lie technique to convince us of the truth of such nonsense as “it’s your money, not the government’s”, which conveniently ignores that if the government didn’t issue the money in the first place we’d all be bartering or foraging for our livelihoods, or that “the death tax is unfair”, which controverts (1) the old adage that “you can’t take it with you”, (2) the fact that you are 12 times more likely to be killed by an accidental gun shot than subject to the estate tax, and (3) the possibly-mistaken idea that America doesn’t have a permanent upper class.
And while I wish you well in your quest to find a better way to fund small businesses, that doesn’t mean that I buy into the idea that small businesses are America’s job creators. Small businesses just can’t and don’t create that many jobs–as many die as are born each year, and the majority of small businesses are one-man or one-family operations with no plans to hire bunches of employees. The job creators are those who build empires, and in all too many cases, one empire is built upon the ashes of a previous one.
Chris Hurn says:
Thanks for your comments, James, and for taking action – your email to your Representative was fine. My apologies I’m a little late in responding to you – I was out with a cold for the last two days. I found your “fixed equity loan” an interesting possible solution to the housing crisis, and your comment that empire-builders are job creators, often on the ashes of previous “empires,” a well-reasoned statement – Schumpter calls this “creative-destructionism,” which is a fundamental concept of capitalism.
Having said that, we don’t quite see eye-to-eye on your other suggestions. Let me briefly explain:
1. I think capping executive pay at 20 times the lowest-paid worker is a disastrous idea (would actually kill low-paid jobs and increase unemployment), though if it’s applied only to those companies receiving government benefits (as you defined them), it would have the unintended effect of shrinking the number of firms receiving such benefits (or trying to receive them)… which is a good thing;
2. The money is “created” by government as a conduit to trade – making bartering unnecessary – I think if Washington were a better steward of our tax dollars, less people would be so angry with how they seemingly squander it. Until such time as we get a better “return,” many people will want to keep more of what they earn and spend it how they want, instead of some moronic Congressman with a special “project”;
3. I think the “death tax” is fundamentally unfair and un-American – if you did well while alive, and were already taxed on that income, why should you have to pay a new “estate tax” of up to 50%? If that’s not the very definition of confiscatory, then I don’t know what is;
4. There may be some members of a “permanent upper class” in America (as there are in nearly all societies), but you only have to read the Forbes 400 list annually to see the dramatic turnover in that list from year to year – this is a great thing; and
5. The facts are there about “small business” creating jobs, whereas “big business” has mostly been job-shedders over the past 30+ years. When people look to “small business” as job creators, I really don’t think they mean the little mom-and-pop operations – they mean the entrepreneurs that take on the risk (for the rewards) and eventually scale (hiring more people as they go) to build their empire. Perhaps it’s just semantics on this last point – I think we generally agree.
Anyway, thanks for commenting.
Duffy Mullen says:
Chris,
I sent the email to my congressman, Dan Burton (Indiana). The 504 refi would help me refinance my commerical building. My problem is I only occupy 1/3 of the building and 504 requires 50% owner occupied.
James Gasperowich says:
In my current role, I try to piggy back in a subordinated position in back of the 504 portion. So I use Mercantile’s name if a bank needs help funding the 504 part.
Chris Hurn says:
Thanks for your comments, James. Yes, please have us help you for any 504 loans you come across. Thanks.
Carlos Enrique Negron says:
I can say for a fact that anyone with Ideas,dreams and the stirring of the economy can not be helped under the portions needed to make a business or the explorations of others in the mines of the intellectuals with the inspirations of becoming their own boss I know because the percentage that is require to be able to get the loans ( 10 % ) This and this goverment bove are full of it. I for myself have worked my own business for 30 years and have plans for a bigger business with all in my back up for it and yet it will not be fruitful due to not being able to get money for it. Obama talks of making jobs and more but I. for one need $700k to do all my plans come to a reality and will put in force over 8 more employees with this. How can I realise this dream of mine and that of 8 or more that are not employed with lies from the president down to those who say that they have money to lend? ILUSIONS, ILUSIONS.
I dare you sent this letter to ”our chosen President ” let him put his words in action. Help this econmy,well I can but it seems I’ve been handcuffed all around.
Chris Hurn says:
We’ll send it to him Carlos, but I’m not sure of the good it will do. He seems a bit “tone-deaf.”.
Charles DeMello Jr. says:
They need to stop cutting people out of the equation.
Chris Hurn says:
Agreed.
Eldon Lynn says:
Chris,
I just wanted to let you know right back that I am not a proponet of the use of the term “BIG Government”.
I have been trying for years to figure out why people use it.
Big government is a good thing as long as it works for the benefit of the people.
If the government wasn’t big it wouldn’t have any clought over those that want to do harm to others for their own greed for the most part.
Sometimes they are right and sometimes they get it wrong.
Sometimes we don’t agree with them but where would we be with them.
If we always strive to do the right thing we don’t have anything to worry about, its when we want to cut corners or get some advantage over another is where we get in trouble.
And that sir is when Big government comes in mighty handy. Except for those that are trying to cheat.
Just like in the song that was written because the tv Weather forcasters were always complaining about rain.
Rain is a good thing and Government is a good thing.
You should be able to figure the rest out.
Keep up the good work, I may need your help one of these days.
Chris Hurn says:
Sorry, Eldon, I have to disagree with you. “Big government” is NEVER a good thing. “Government” is a necessary “evil” when and IF it’s working well for us… the problem is: it often isn’t (it does usually for SBA 504 loans, but there are few other government program that work equally well… probably because there are few true public-private partnerships out there). Also, any economist (or entrepreneur) will tell you that the larger the public sector gets (government and it’s tenacles), the smaller the private sector gets (it shrinks). Any “jobs” that the public sector “creates” have to be paid for with taxes or the funds must be borrowed – either way, it’s not the best option. A LIMITED government is what we need – one that protects (as you said) certainly, but NOT one too big to be destructive.
Two quotes from Thomas Jefferson might better illustrate my points here:
“A government big enough to give you everything you need, is a government big enough to take away everything that you have….”
“The course of history shows that as a government grows, liberty decreases.”
Take care,
Robert Helt says:
Stupid to bother to reply but your big business minded attitude and general Republican rhetoric has pushed me to block you from my e-mail and look for funding elsewhere. Do you really think about the crap you spout?
Chris Hurn says:
Your ignorance about me is rather profound.
I ONLY finance small businesses and have been quite their advocate for nearly 15 years — just TRY to find an example anywhere of me siding against small business and in favor of Big business. You won’t.
I spent nearly $10,000 last September, for instance, creating a video that got nearly 79,000 views just on YouTube that was ALL about how Washington (BOTH parties) has ignored Main Street. Perhaps you should watch it and learn a thing or two? You could watch many of my 139 videos on our YouTube channel and find me CONSISTENTLY on the side of small businesses and trying to get our government to work better for them.
I also own three small businesses, so what I “think” about is how purely foolish or evil (take your pick) wealth redistributionist rhetoric is. That’s the main “crap” I hear repeatedly.
I’m a capitalist, and I vote for whichever individual better represents that world view, because I think it is the best economic system that has done the most good — all others are highly inferior… much like your apparent “research” and comments about me.
Bill Reddington says:
Hope it works. Everything is sooooo restrictive that they are hard to deal with. Will pass it along.
Patrice Gallagher says:
Disgusting! You are only a fan of Government when it suits YOU.
Stop with the phony baloney tired “big government” rhetoric.
Big, small, wide, fat, skinny – Be glad Your Government protects you!
It is because of our Government and our Forefathers blood sweat and tears that you have the frickin freedom to send this e mail or be in business or open your mouth and express your ideas freely.
Thank God for Government Regulations!
Chris Hurn says:
No, Patrice, your comments are the only thing that’s “disgusting” here. I am a “fan” of government programs that work WELL – the one we specialize in just happens to be one of those. Unfortunately, there are literally thousands of government programs that do NOT work nearly as well. I don’t particularly think our Forefathers would want such waste… nor do I. And speaking of Forefathers (since you brought them up), they were mostly “fans” of limited government and of LIBERTY, as am I. I would NEVER “thank God” for government regulations. I thank him for our Forefathers… who also would probably NOT thank God for government regulations. As for my “frickin freedom,” yes, I have our Forefathers to thank and our great military (of which, include many members of my family, present and past)… and if you knew much about me, you’d know that I thank them ALL the time and in quite a number of ways.
Kurt Naik says:
Mr. Hurn, Loved your articles on Capitalism.
Peter Bowleg says:
Thanks for the information.
Gordon Majors says:
Can’t trust the government enough to be partners with them in a SBA loan. Our president demonstrated as late as yesterday that he is anti business and anti stockholder or in effect investor. To condem Bank of America for creating a debit card fee to offset lost interchange income pure socialism. Dodd Frank tells it all!!!!!
Chris Hurn says:
I don’t necessarily disagree with your sentiments, Gordon, but we’ve never really had major issues with the SBA. Perhaps it’s time to “outsource” these to us and let us do the heavy lifting?
Yes, it was pretty bad what the President said about BofA — he and his administration apparently don’t understand the unintended consequences of their regulations (remember when Caterpillar took a hit to their earnings for healthcare expenses after Obamacare was finally passed over the objections of the American people — and how pissed-off Obama was about that too… they were just following GAAP). I’d repeal Dodd-Frank in a heartbeat, if I could (SarBox, too).
Let me know if you’re willing to give us (not necessarily the government) a chance.
Thanks and take care.
Angela says:
I have to concern with Carlos Enrique Negron response – which many dreams are being lost under the correct administration. My business is 100% owned by my sister and I. We can only get a loan if we have $110,000 cash in the bank and they might give us a $100,000 loan. No logic to that! And we have excellent credit. It is ridiculous and frustrating when we are trying to create jobs in America and start a new revenue source for the government to collect taxes!
Chris Hurn says:
Thanks for commenting, Angela, and for concurring with Carolos. I’d try a different bank, if I were you.
S. Robbins says:
Let me get this straight: Congress approves $7.5 billion/year to help small businesses, but makes it so hard to qualify that only a fraction of the money gets put to use. Isn’t that dandy? It also excludes helping refinance existing SBA 504 loans. What were they thinking?!
I got one of those “deals” in Sept. 2008 at the height of the financial crisis, but since the SBA debenture process takes two months, my interest rate wasn’t set until November 2008, when it spiked to 7.72%. It has been dropping ever since, (currently 4.83%) yet I’m stuck with a rate 3 points higher!
I feel duped by the SBA loan process and want to know how to refinance the loan without paying a huge pre-payment penalty. Furthermore, I’d like to know of any class action law suits against this kind of predatory lending by the same government agency that was set up to help small businesses.
Thank you!
Chris Hurn says:
Couple things:
1. You’re in an unfortunate situation. I get that, and I certainly sympathize.
2. Yes, Congress made it impossible to refinance an SBA loan with another SBA — I didn’t make the rules; I’m only reporting them.
3. And yes, Congress made $7.5 billion ADDITIONAL available for two years (each), but then the Agency bungled the release of their regs, thereby wasting approximately $7.2 billion that COULD have been used to help small businesses just last year. Again, I didn’t go this — I’m only reporting it.
4. Your debenture date of November 2008 was one of the worst dates possible… and was just a fluke occurrence. The debenture rates (yields to investors) are set about two weeks before funding in the middle of each month. So your debenture rate got spooked by the collapse of Lehman Brothers, the commercial paper markets, and just about every other “doomsday” prediction that was happening in October/November 2008.
5. Your rate is still below the 8.5% 50-year average for commercial property and is FIXED for 20 years. Yes, it wasn’t as great as it (normally) could have been, but it’s not usury or unfair by any means.
6. I don’t think you were “duped,” but the world was “nearly” coming to an end at that time… at least according to the financial markets. These things DO happen and it’s certainly not good for people like you.
7. Using words like “predatory lending” and “class action” is probably over-reacting a bit. I don’t know of many people who have any luck suing the government. Sorry. The SBA’s 504 loan process has been going strong for over 30 years. What you (and all of us) experienced was something that hadn’t happened since the Great Depression of the 1920s and ’30s.
Again, you have an unfortunate situation, and I’m sorry it happened, but there’s not much I can do about it. Perhaps you can ask your CDC for a six-month deferment on their portion (the SBA allows them to do at least two six-month deferments), if that helps you some? You have my best wishes in your situation.
S. Robbins says:
Thank you for responding to my post. Your points are well-taken, however I still believe that the SBA should be held accountable for doing its job. The fact that it has the money from Congress to help small businesses and yet hasn’t made it readily available is in direct violation of its mission. And yes, the world was “coming to an end” in fall of 2008, but here we are. The large banks and corporations got their tax-payer bail-out, but I still have to pay high interest rates and taxes because my company is not considered “too big to fail”. This is not the American way.
Chris Hurn says:
I certainly agree with your conclusion. The Small Business sector of our economy has gotten only rhetorical flourishes out of the people in DC. You should watch the video I created a couple years ago about this: http://www.youtube.com/watch?v=exiaXd2BHdY&list=PL0C43ACA80676CDC9&feature=plcp&context=C35a7e5bFDOEgsToPDskIJVvEzhbysfGRpfLQopwun