New Rules Eliminate Some Restrictions On Popular Loan Programs
On Monday, April 21, the Small Business
Administration implemented a series of rule changes designed to make it easier
for small businesses to obtain loans. The changes primarily impact the SBA’s
7(a) and 504 loan programs. The 7(a) program is the SBA’s basic loan offering,
where a bank usually provides all the financing, insured in part against
default by the SBA, while the 504 program involves loans for real estate or
machinery that are split between a bank and a Certified Development Company.
The SBA is eliminating the personal resources test for these loans, and will no
longer require applicants to detail their individual wealth and personal
assets, which had been used to weed out borrowers who could finance expansions
themselves. In addition, the SBA is now allowing borrowers taking out 504 loans
to use a variety of resources as collateral, rather than just that which the
loan is being used to purchase. In addition, 504 loans can now be used to
finance projects begun more than nine months before a loan application is made.