U.S. Small Business Administration (SBA) loans have been around since 1980 and have changed very little since then. However, from time to time, the SBA does issue Standard Operating Procedures (SOP) to update their policies and guidelines governing SBA products, which include 504 and 7a loans.
In February of this year, the SBA issued SOP 50 10 5(K), Lender and Development Company Loan Payments. It went into effect on April 1. One noted change was to increase the credit threshold from 10 percent to 20 percent for borrowers who qualify for other types of financing.
Another noted policy change concerns the eligibility of marijuana-related businesses. Consistent with the Agricultural Improvement Act of 2018, this revision provides new eligibility to businesses that grow, produce, process, distribute, or sell hemp-related products.
While there are currently only five companies that have been conditionally approved to open medical cannabis processing facilities in Virginia, this could expand soon. Also, the North Carolina House of Representative filed a bill in March 2019 to legalize medical marijuana, which could open a number of doors for small businesses.
One of the more prominent changes coming from the issuance of SOP 50 10 5(K) is the addition of a 25-year debenture in the 504 Loan Program. This means that the term on 504 loans for real estate purchases has increased by an additional five years. This is obviously very good news for small businesses that need a little extra breathing room on their loan repayment. The extension can provide a significant drop in the monthly payment amount, freeing up extra incoming profits for other areas of the business.
The bottom line is, the new SOP is trying to make it even easier for small businesses to qualify for and hold SBA loans. There is an 11-page summary of the updates, revisions, and clarifications available on the SBA website if you’re interested in pouring through it. However, a better idea would be to discuss your plans with 504 Capital Corporation and let us do all of the legwork for you. We’ll help you find the loan that works best for your business, without all the red tape.
