3 Changes to the SBA 504 and 7(a) Loan Programs
The Small Business Administration has made changes to the 7(a) and 504 loan programs to help small business owners access capital. The following changes are effective as of April 21, 2014.
Elimination of the Personal Resource Test for 7(a) loans: Under previous procedure, the SBA required that any owner of 20% or more of a small business to disclose their personal resources. If personal resources were readily available, SBA required that the resources above a certain amount be included into the businesses financing package to reduce the amount of SBA guaranteed funds that would otherwise be needed. This rule has been eliminated.
Collateral Flexibility: The SBA will also allow 504 loan collateral to extend beyond the property or machinery being financed, allowing borrowers to have additional collateral options. This could help the borrower cut their interest rate or secure better terms for the loan.
Elimination of the 9-Month Rule: Previously, any expenses incurred more than nine months prior to the loan application being received by the SBA, would not be covered by the loan. The elimination of the rule now ensures that 504 financing will cover any expenses, regardless of when the cost was incurred, as long as they are directly related to the project. This change will now allow businesses a longer timeframe to organize their small business project.
The Washington Post outlined these changes in a recent article. The full information notice released by the SBA can be accessed here >>.