The Small Business Jobs Act Update

The Small Business Jobs Act that is heading for approval may be just what the commercial market needs to get a spark to light the commercial real estate market fire. The bill is proposed to make $30 billion available to community banks for lending to small business. Key points of the bill include:

• The $30 billion will be made available for expansion of small business
• Real estate transactions including (for the first time under SBA sanction) refinancing real estate holdings for small businesses who may find it difficult to find financing for their real estate renewals in the current environment
• Only banks with fewer than $10 billion in assets will be eligible for funds
• Banks will have to pay a 5 percent dividend on capital from government investment
• Banks will have to pay a 7 percent dividend if they don’t increase small business lending in the first 2 years

The bill also invests in a $2 billion dollar grant pool, but states would need to show that there has been at least $10 in new lending for every $1 in federal grant money they receive. This is great news for states with successful small business funding programs, which could generate $20 billion in lending from the $2 billion dollar fund.

If you've been seeking an SBA loan, you could stand to benefit from this measure. The bill would extend provisions that amped up SBA lending guarantee programs and fee reductions that recently expired.

In addition, the bill would increase the maximum loan size for the SBA's 7(a), 504, and microloan programs. The 7(a) and 504 loan program maximums would bump from $2 million to $5 million and the microloans would increase from $35,000 to $50,000.

Loans made under the SBA Express program would temporarily increase from $300,000 to $1 million. It also includes a temporary allowance for small-business owners to use 504 loans to finance certain mortgages to avoid foreclosure.

Business owners would be able to write off the whole cost of acquiring property immediately instead of over time.

For 2010 and 2011, this change to "Section 179 expensing," so-named for a section of the Internal Revenue Service code, would allow taxpayers to write off up to $500,000 in capital expenditures. Expenditures over that amount would phase out, up to a ceiling of $2 million.

The bill would allow taxpayers to expense up to $250,000 of the cost of qualified improvements on leased property, restaurant property, and improvements to retail-business property. Business owners could also deduct the cost of health insurance for themselves and their families when calculating self-employment taxes.

This is positive news for the commercial real estate community lenders that want to become more actively involved with SBA lending as well as conventional lending for the expansion of small business.

As the bill moves through House of Representatives there may be provisions added and removed, but this is the full version of the bill as it is being proposed.

Full Text of Bill

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