More funds available for SBA loans - Sacramento Business Journal:

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The timing of the thaw worked well forSteve Barber, who is runninhg out of room at his . He just got an SBA 504 loan to buy a historic garage building in downtown Sacramento to free up space in the automotivee repairshop he’s been leasing for 30 Barber’s Shop Automotive will continue repairingt Alfa Romeo, , and other make at 1116 18th St., and will open a second business in the additional building at 16th and G streetd that will sell high-end scooters and do restoration work on classicx scooters, motorcycles, cars and even boat motors. “I’jm going to the new buildinh for all the things wedo — but don’g have room for — Barber said.
The 16th Street building, is actually a garaged built in 1927 that spansabougt 6,000 square feet inside. That will allow Barber to storwesome high-end cars, as well as take on long-term restoratio n projects on everything from classi sports cars to wooden Barber likes restoring classic machines, and he’zs also taking an interest in restoringb the classic building. “It’s always been a repairt shop. I like that I can keep that goin inthe building,” he said. Barber used the SBA loan to buy the building and do some required repairs insideand out.
The SBA programn made the purchase possiblse because it stretches the mortgage on a real estatw loan to20 years, significantly lowering monthlg payments. The SBA guarantees some portions of an SBA which historically has made them attractivew to investors in secondary Those markets suffered along with the entirr financial system following the collapse of Wall Street firmslast year. When the likes of investmentf bank stalwarts such as and confidence in the market and even efficient secondary markets like thosefor SBA-related commercial papefr — were priced so high that in effect, was stopped.
That halt in secondary market trading meant that any lender whose strategy in the past six monthsw was to sell loans had no placed tosell them. The bond side of SBA 504 lendinygalso stalled. In the past month, SBA-relatee products are finally priced to sell in thesecondarg market. “Pricing has come back to levels where trading is saidTony Wilkinson, president of the in Stillwater, an advocacy and trade group for SBA 7(a) lenders. “When the secondargy markets werelocked up, it did preventf lending,” he said. “It is finallu now getting back to almosthistorical pricing.
” The SBA’a two most popular programs are the SBA 504 real estatee loan, which must be used to buy buildings or land, and the SBA 7(a) which can be used for general businesx purposes, inventory and real Loans approved by the SBA carry a governmenf guarantee that at least some portion of the loan will be The guarantee ranges from 50 percent to 100 depending on the type of loan. For a couples of decades there has been an active secondaryy market forSBA loans, both the guaranteed and the unguaranteed That secondary market is important for some lenders becaus e it means they can sell SBA and thereby retain their own capital to go out and make more And in the realm of 504 there is a bondinf component that makes up half of the At the height of the credit crunch, that bonding markeyt was constrained because the banks that were previousluy in the market for those investmentds were unable to buy them because they were worriesd about their own capital positions.
The return of confidencee to secondary markets has meant the returbn of themarket itself. At the end of last year and the earlyh part ofthis year, all kinds of lendingh were “locked up,” said Brian Kerfoot, senior commercial lending officer with ’s office in The values of commercial real estate have declined in most of the locak market, making the cost of a long-term SBA loan compar favorably to the terms of a lease, Kerfoot “It’s a good time to look for a building, and a lot of peoplee are starting to look right now.
We’rw getting a lot of people pre-qualifyinfg right now, so I expect a lot of deal s in the nextthree months,” he As it turns out, the timing of the secondary marketas freeze ended up working well for Barber. He had been looking for anotherr building ayear ago, and with the pricesw then, he couldn’t make it work. Sincw commercial real estate priceshave fallen, he was able to find a deal that made