(Cincinnati, OH – 4/04/2013) Proposed changes to loan qualifications would help more businesses qualify for Small Business Administration (SBA) financing, according to the Hamilton County Development Company (HCDC).
The SBA has proposed to eliminate the personal resource test and reduce affiliation restrictions. These changes are designed to provide access to SBA financing for more small businesses.
“Each of these proposals is significant and worthwhile,” said David Main, HCDC President. “This should increase the number of applicants that will qualify for SBA financing and will enable us to work with more businesses, help them expand and create jobs.”
“These changes will rationalize the lending process and will help business expansion,” Main added.
By dropping the personal resource test, owners of companies no longer will be forced to first expend all of their personal finances before obtaining an SBA loan.
Current guidelines restrict loans to applicants based on their affiliations. This can restrict loans to companies headed by serial entrepreneurs. It also affects businesses owned by individuals who’s spouse has an ownership stake in a different company. Dropping the affiliation rules will provide a funding source for serial entrepreneurs and people with a financial interest in another company.
The SBA also has proposed changes to reduce application paperwork. It also is proposing the elimination of the “nine month rule” for the 504 program, which limits businesses to include only project expenses that have occurred during the previous nine months.
“These are changes that should help us to work with more businesses that are primed for successful expansion,” said Main. “While none of these proposals will drastically change our operations, collectively they will help us to help more companies.”
The proposed changes are to regulations on both the 504 and 7(a) loan programs. The 504 loan program is an economic development lending tool intended for long-term, fixed interest rate financing of fixed assets– including real estate land and buildings and equipment. The 7(a) loan program is a capital access program designed to provide working capital and asset financing for various general business purposes for startups and existing small businesses.