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Week of Feb. 2, 2009

Stimulus Bill Would Boost SBA Lending – Washington Business Journal.

Stimulus Bill Aims to Boost SBA Lending
Kent Hoover Washington Bureau Chief
Monday, January 26th 2009

The initial House version of the economic stimulus bill would give the Small Business Administration $430 million to revive its ailing loan programs.

The bill would increase the government guarantee on the SBA's 7(a) loans, and empower the agency to make loans directly to small businesses, a function that now is performed by private-sector lenders.

Many of those lenders, however, are no longer making SBA loans. Through Jan. 9, the number of 7(a) loans is down 56 percent this fiscal year, which began Oct. 1, compared with the same period a year earlier. Total dollar volume was down 40 percent, to $2 billion.

Use of the SBA's 504 loans, which finance real estate and other fixed assets, also dropped sharply. The number of 504 loans was down 40 percent, and the dollar volume was down 43 percent.

The legislation would encourage lenders to start making 7(a) loans by temporarily increasing the amount guaranteed by the government from the current maximum of 85 percent to 95 percent. This would make the loans less risky for lenders and free up capital for additional loans, according to the House Small Business Committee.

The bill also would allow a small business to apply directly to the SBA for a loan. The agency would first forward the application to lenders within with 100 miles of the applicant's location. If none of these lenders decide to make the loan, the SBA would send the application to participants in the agency's Preferred Lenders program. If these lenders pass, the SBA itself could then originate, underwrite, close and service the loan.

SBA loans also could be used to refinance existing loans of up to $10 million, under the legislation. The lender, however, would have to accept less than 100 percent of the loan's balance and principal.

The legislation also aims to restore the secondary market for SBA loans, which has been dormant in recent months. The inability of lenders to sell their existing SBA loans on the secondary market has prevented many from making new SBA loans. The stimulus bill would enable the SBA to make loans to broker-dealers who operate the secondary market. The SBA could also guarantee pools of first-lien 504 loans sold to third-party investors.

President Barack Obama has called for the SBA to make direct loans and increase its loan guarantees. He also advocates lowering fees on SBA loans.

High fees and other program costs have driven many lenders away from the program, said Paul Merski, chief economist for the Independent Community Bankers of America. The number of lenders that made at least one 7(a) loan has dropped from 5,288 in 2001 to fewer than 2,700 today, he said. A few large banks dominated SBA lending in recent years.

"This gross imbalance in SBA lending was a recipe for disaster," Merski said. "Many of the largest financial players have tripped up on toxic investments and subprime lending, and have been forced to pull in their lending across the board -- including small business and SBA lending." SBA officials cite several reasons for the decline in SBA loans, including reduced demand due to the weak economy. Borrowers have tightened lending standards, and many small businesses are less creditworthy than they were when the economy was healthier.

In order to make SBA lending more profitable, the SBA now allows lenders to charge higher interest rates on the loans. It also gave assemblers of SBA loan pools more flexibility on interest rates. Meanwhile, the Federal Reserve Board announced plans for a lending facility designed to provide more liquidity to issuers of SBA-backed securities. These recent steps eventually will boost SBA lending, according to agency officials.

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D.C. Restaurant Apologizes to Marines;
Reverses Policy

(Ed’s Note: The following is part of an e-mail correspondence from Wayne Gatewood, CEO of Quality Support Inc. He had alerted veterans worldwide to an incident at a D.C. restaurant when U.S. Marines were barred from entry. Wayne’s letter is accompanied by an official letter of apology from the restaurant owner. We feel a need to disseminate this to our valued clients and fellow veteran entrepreneurs.)

Back on September 18, 2008, I disseminated an e-mail from a Marine Corps Master Sergeant who, along with a Marine Corps Captain, both in civilian clothes, were barred entry into the Hawk and Dove (H & D) Bar/Restaurant after the Captain showed his active duty military I.D. card. The reason…….they were single Marines.

After numerous e-mails were received and disseminated, after the reporting of this incident by local News Channel 7, WJLA, my friend Stephen Gould, a small business owner from Ohio and a Marine Corps Reservist, stepped forward and volunteered to collect and consolidate any and all statements from those who contacted the H & D and were told by management, that “yes” it is our policy to not allow active duty single Marines and military into their establishment. Stephen ended up with his Statement and mine, along with those of former Marine Gavin Cain and a VP of my Company, Mario DiFranco. 

Stephen Gould then took it on himself to file an official complaint with the D.C. Office of Equal Rights, and once the complaint was processed, asked me if I would attend a scheduled Mediation Hearing with him. The Hearing was held on January 13, 2009, and in attendance was the owner of the H & D, his attorney, a Mediator from the DC Government, and Stephen and me. The Lawyer for the H & D came right to the point as did the owner, and apologized for the discriminatory policy, and said an official letter of apology would be written for dissemination to our Veterans and troops……that letter is attached for your reading.

Based upon the sincerity of the H & D owner, and the content of the letter, Stephen agreed to not go forward with legal actions regarding this matter and we both agreed that we would disseminate the letter for your reading.

The owner of the H & D welcomes all military personnel to his establishment; he just asks that they conduct themselves with decorum and do not arrive at H & D sloppy drunk looking to start fights and outbursts…….I think we all agree that his concerns are valid. Bottom line is, H & D will not discriminate; rather, H & D management will call the Police on any and all persons who are looking to cause problems, military and civilian alike.

There is a particular Marine Corps Colonel (Ret) on my Distribution List, and I will be contacting him and ask that he get in touch with the Commanding Officer of “8th & I,” and ask the C.O. to remind his Marines of their individual and collective responsibilities and conduct, especially as it comes to H & D. Big thanks to Stephen Gould in particular for his extraordinary efforts in this matter. Thanks also to those of you who indicated your availability if necessary, and thanks to Gavin Cain and Mario DiFranco for their Statements. 

Now, let’s go on and get the Congress to make sure our Service Disabled Veterans in business are getting that 3% of all federal government procurement dollars as required by Law, and that the Congress is doing all that can be done to ensure across-the-board and optimum health care, educational benefits, enhanced and expeditious claims processing, and all other required care and support for all Veterans everywhere.

Best to all and Semper Fi,

Wayne M. Gatewood, Jr., USMC (Ret)
President/CEO
Quality Support, Inc.
A Service Disabled Veteran and Minority Owned-Small Business
8201 Corporate Drive, Suite 220,
Landover, MD 20785

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