White House Wants to use SBA for Commercial RE

President Obama wants to expand Small Business Administration guarantees to commercial real estate loans, a move that may bolster the struggling market. The administration is asking Congress to allow owner-occupied commercial real estate loans maturing in the next year to be refinanced through the SBA's 504 program. That program currently cannot be used to refinance maturing debt. The president also proposed increasing the cap for SBA Express loans, which carry a 50% government guarantee, to $1 million from $350,000. "Even companies with great credit histories are facing challenges refinancing at what are historically low rates," Obama said during a speech in Maryland. "Property values have fallen and lending has dropped. As a result, many businesses that would otherwise survive this downturn are at risk of defaulting, which in turn will lead to even lower property values and less lending." Under the proposal, existing lenders would refinance up to 70% of the current property value and the SBA would finance the balance. When new lenders do the refinancing, the SBA would finance even more, up to 40%. The administration said nearly $19 billion of commercial real estate loans could be refinanced each year.