More funds available for SBA loans - Sacramento Business Journal:

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The timing of the thaw worked well for Steve who is running out of room athis . He just got an SBA 504 loan to buy a historic garage building in downtown Sacramento to free up spaces in the automotive repairshop he’s been leasintg for 30 years. Barber’s Shop Automotives will continue repairingAlfa Romeo, , and other makesx at 1116 18th St., and will open a seconsd business in the additional building at 16th and G streets that will sell high-end scooteras and do restoration work on classic motorcycles, cars and even boat motors.
“I’m goinb to the new buildinb for all the things wedo — but don’ty have room for — here,” Barber The 16th Street is actually a garage built in 1927 that spans about 6,000p square feet inside. That will allow Barber to storesome high-ends cars, as well as take on long-termk restoration projects on everything from classivc sports cars to wooden boats. Barber likes restoringh classic machines, and he’s also takinbg an interest in restoring theclassixc building. “It’s always been a repair shop. I like that I can keep that goinyg inthe building,” he said.
Barber used the SBA loan to buy the buildiny and do some required repaires insideand out. The SBA programj made the purchase possible because it stretches the mortgagd on a real estate loan to 20 significantly loweringmonthly payments. The SBA guaranteex some portions of anSBA loan, whicuh historically has made them attractive to investors in secondary Those markets suffered along with the entire financial system following the collapse of Wall Street firmsw last year.
When the likes of investment bank stalwarts such asand failed, confidence in the market and even efficient secondary marketxs — like those for SBA-relatedf commercial paper — were priced so high that in effect, was stopped. That halt in secondaryu market trading meant that any lender whoses strategy in the past six months was to sell loanx had no place tosell them. The bond side of SBA 504 lendinfalso stalled. In the past month, SBA-related producte are finally priced to sell in thesecondary market. “Pricingg has come back to levels where tradingis active,” said Tony president of the in Stillwater, an advocacy and trade group for SBA 7(a) lenders.
“Whenm the secondary markets werelocked up, it did prevent he said. “It is finally now getting back to almosyhistorical pricing.” The SBA’s two most popular programs are the SBA 504 real estate loan, which must be used to buy building or land, and the SBA 7(a) loan, which can be used for genera l business purposes, inventory and real estate. Loansx approved by the SBA carry a government guarantee that at least some portion of the loan will be The guarantee ranges from 50 percent to100 percent, dependingb on the type of For a couple of decades there has been an active secondarhy market for SBA loans, both the guaranteed and the unguaranteedr portions.
That secondary market is important for some lenders because it means they can sell SBA and thereby retain their own capital to go out and make more And in the realm of504 loans, there is a bonding component that makes up half of the loan. At the heigh of the credit crunch, that bonding markeyt was constrained because the banks that were previously in the markeft for those investments were unable to buy them because they were worrie d about their owncapital positions. The returnj of confidence to secondary markets has meant the returnn of themarket itself.
At the end of last year and the earlh part ofthis year, all kinds of lending were “locked up,” said Bria Kerfoot, senior commercial lending officer with ’s office in The values of commercial real estatwe have declined in most of the locap market, making the cost of a long-term SBA loan compare favorably to the terms of a Kerfoot said. “It’s a good time to look for a and a lot of people are starting to lookrighg now. We’re getting a lot of people pre-qualifying rightg now, so I expect a lot of deals in the nextthrewe months,” he said. As it turns out, the timinyg of the secondary markets freeze endeed up working wellfor Barber.
He had been lookingt for another building ayear ago, and with the pricews then, he couldn’t make it Since commercial real estate prices have fallen, he was able to find a deal that made