CIT
Funds $84.8 Million in December
CIT, the nation's #1 SBA lender, broke its own funding record
by closing $84,775,000 in SBA loans in the month of December.
$40,250,000 of December's loans were closed by the Western
Region based in Golden, Colorado, while the balance was divided between the
Eastern Region, based in Livingston, New Jersey and Team National, which
specializes in smaller loans.
HR 5545, the "Small Business Loan
Improvement Act of 2000" has been signed into law. The changes took effect December 21, 2000.
The law adds prepayment
penalties for loans with maturities of 15
years or longer, simplifies guarantee
fees, establishes a maximum loan amount
for the 7(a) program, increases the SBA
guaranty to $1 million and makes a variety of smaller changes to the
flagship 7(a) and 504 programs.
For the first time, the 7(a) program is
subject to prepayment penalties. Loans maturing in 15 years or longer, if
prepaid in full or in part within the first 3 years, will be assessed a penalty
of 5% the first year, 3% the second year, and 1% the third year.
Partial prepayment means that 25% or more
of the outstanding loan balance is paid in any calendar year.
The penalty assessments go to the SBA, not
the lender.
There is still NO prepayment penalty for
loans maturing in less than 15 years.
The "good old days" of the flat
1% fee have not returned, but the confusing sliding scale has been replaced by a 3-tier
structure geared to the total loan amount. The fee is applied to the
percentage of the loan which is guaranteed by SBA.
Loans of up to $150,000 may have up
to an 85% guaranty. The fee is 2% of the guaranteed portion. Thus a
loan of $150,000 with an 85% guarantee would have a guarantee fee of $2,550.
Loans above $150,000 and up to $700,000
may have up to a 75% guarantee. The fee is 3% of the guaranteed
portion. Thus a loan of $700,000 with a 75% guarantee would have a
guarantee fee of $15,750.
Loans over $700,000 may have a
guarantee of 75% or $1 million, whichever is less. The fee is 3.5% of the
guaranteed portion. Thus a loan of $2 million with a guarantee of $1
million would have a guarantee fee of $35,000.
The 7(a) program had allowed loans of an
unlimited size, but with the SBA guarantee limited to $750,000. Now, the
maximum total loan is $2 million, and the maximum guarantee is $1 million.
Projects over $2 million can still be
financed under the 7(a) program, but they will now need to include companion or
"piggyback" loans.
The maximum guarantee is now $1 million,
replacing the old $750,000 limit.
Among other things, this means that existing
SBA borrowers are now eligible to borrow at least $333,333 more under the
7(a) program.
The 504 program also has a new,
increased limit - if the project meets one of 9 public policy goals, the limit
becomes $1.3 million. In the usual 50-40-10 scenario (50% of the project
cost comes from a conventional first loan, 40% comes from the Certified
Development Company at a below-market fixed rate, and 10% from the borrower) the
increased limit makes projects up to $5 million feasible.
The nine 504 public policy goals are:
Veteran owned businesses Minority owned businesses Women owned businesses Rural Development Business District Revitalization Export Expansion Enhanced Economic Competition Changes caused by Federal budget
cutbacks (such as base closures) Business restructuring from Federally
mandated policies affecting the environment, employee safety or health Projects which do not fit into one of
these 9 public policy goals still benefit from the $1 million limit. 
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CIT
Funds $84.8 Million in December
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New Law Changes SBA Programs
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PREPAYMENT
PENALTIES
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SIMPLIFIED
GUARANTY FEES
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LOAN SIZE
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INCREASED
GUARANTEE
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Read H.R.5545
Read SBA Notice 5000-703
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