With SBA Loans On Hold, Lender Describes a Remedy
In it second week, the federal government shutdown is hitting borrowers of Small Business Administration loans, especially seekers of 504 loans for real estate acquisitions. At least one lender is touting a solution.
“New approvals of SBA loans have been put into a queue, and won’t be able to be responded to until Congress passes a continuing resolution,” reports Alex Cohen, CEO of Liberty SBF, a commercial real estate finance company with an office near Philadelphia and in Newport Beach, California.
“That has a major implication in terms of going on with new approvals, but it also has the potential to cause issues with deals that are scheduled to close,” he adds. He expects the effects to linger after the government gets back to business, because 45 to 60 days typically pass between originating a loan and closing.
Liberty is spreading the word that, like other lenders, it provides interim loans to bridge the gap between a deal’s closing and final loan approval. When the shutdown began last week, his clients weren’t worried because they expected a quick resolution. This week, the number of calls is rising.
“The longer this thing goes out we’ll see more serious inquiries. Once you start hitting the middle or the end of the third week, you may start to get worried,” if you’re a borrower looking to close.
He says interest rates on bridge loans are likely to be a bit higher than usual, given the uncertainty, but eventually rates should return to record lows. “We all feel confident this will be resolved, after some games of chicken by people on the Hill,” he says.