In 2012 our bank benefitted from the SBA refinance program. Tim Cramer, EVP of Florida Business Development Corp.
, and I have been working together for over 14 years. Frankly, the economic stagnation of businesses (which caused business owners concern over losing their facilities) turned out to be an economic stimulus, as it encouraged businesses to buy their business’s real estate, thus establishing a solid capital base upon which they could not only survive, but thrive.
Certainly, the two biggest hurdles in refinancing businesses out of a non-conforming mortgage (or a mortgage which no longer fit the business plan of the acquiring bank of a failed institution) are value and debt service coverage. Values are generally rising as most anecdotal information will tell us. However, appraised values lag behind because of comparables generated by short sales and foreclosures, which continue to dominate the appraiser’s market valuations. Higher cap rates have not been a real problem, yet. Artificially low rates have kept them low but rent comparables have also declined and seem to be firming up in most areas. Therefore maintaining a 90 percent loan-to-value ratio is important because of its ability to resolve the refinance situation. Perhaps a viable solution is to add a small premium to the rate that can be added like mortgage insurance for the first five years. The purpose of this is to add a pool of funds for handling defaults. I realize that there are many components to the rate and fees that supplement defaults, but, there is a window of opportunity that will be available where low rates can assist in an effort to build the pool of funds.
Support for this program is for businesses. They don’t vote, but the people who work there do. This is a no cost way to assist with a languid recovery from the bottom up rather than the top down (as the top down approach has yielded mixed results over the past five years). My compliments to NADCO for its continued dedication to SBA 504 Debt Refi Legislation. Once passed, Debt Refi will benefit the small business economy for years to come.
Thank you again for your efforts.
L. J. (Larry) McDermott
1659 N. Clyde Morris Blvd Ste #2
Daytona Beach, FL 32117